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STAAR Surgical Reports Third Quarter Results

  • 2001-10-24
  • Press release

MONROVIA, Calif., Oct. 24 /PRNewswire/ -- STAAR Surgical Company (Nasdaq: STAA) today reported results for its third quarter, ended September 28, 2001. The Company's operations were cash neutral for the full quarter, ahead of management's projections to be cash neutral by the end of the third quarter.

Revenues for the quarter were $12.2 million, compared to $13.7 million for the third quarter 2000 and $12.9 million in the second quarter of 2001.

The Company incurred a net loss for the quarter of $1,991,000 or $0.12 per share. Excluding $2.3 million of non-operating charges recorded during the quarter, the Company would have reported a net loss of $701,000 or $0.04 per share. Net income for the third quarter of 2000 was $542,000, or $0.04 per basic and diluted share. In the second quarter 2001, the Company incurred a net loss of $227,000, or $0.01 per basic and diluted shares, excluding a $5.6 million charge.

Planned charges of $155,000 were taken during the quarter related to employee separation and the preliminary costs of subsidiary closures. The charges were considerably less than the $2.5 million previously projected due to the need to resolve certain regulatory issues in order to determine the timing and amount of the write down of certain production assets.

In addition, the Company reserved $ 2.1 million for notes held by STAAR that had been issued to directors in the past. Collateral for the notes, which are secured by shares of the Company's stock and other assets, became insufficient following the recent drop in the Company's stock price. In the fourth quarter of 2000, the Company reserved $1.5 million for these same notes.

For the first nine months, revenues declined $2.7 million to $38.0 million, compared to $40.7 million for the same period a year ago. Eliminating the negative effect of year-over-year currency exchange rate changes and operations discontinued during calendar 2000, the decline in revenues would have been $725,000 or 2%. Excluding charges, there was a net loss for the nine months of $1.2 million, or $0.07 per diluted and basic share. With the charges, the net loss was $6.4 million, or $0.38 per diluted and basic share. For the same period a year ago, STAAR reported net income of $475,000, or $0.03 per diluted and basic share before charges. After charges, the Company reported a net loss of $17.7 million or $1.21 per diluted and basic share.

Excluding non-operational charges, the Company generated positive cash flow for the quarter. All inclusive cash flow was a negative $172,000 which included non-operational expenditures of $248,000.

David Bailey, President and Chief Executive Officer said, "We made a pledge to shareholders when we announced our new business strategy on August 1, 2001 that STAAR would be cash neutral on operations by the end of the third quarter. This would reverse an annualized burn rate from Q1 of 2001 of over $10.0 million. We beat that pledge by being cash neutral throughout the quarter and stand well positioned to be cash positive in Q4. This is an outstanding achievement.

"While we are disappointed by the shortfall in revenues for the quarter, we enter the fourth quarter encouraged by signs that we are at the end of this short-term trend," Bailey said. "A combination of the impact of our sales team being distracted by the two voluntary recalls in the second quarter and a later than expected approval of the Aqua-Flow Glaucoma Drainage Device has set our sales expectations back and resulted in lowering our revenue expectations for the year by approximately $4 million. Consequently, we believe we will lose $0.09 per share, rather than break even in 2001.

"Our earnings are also being impacted by higher cost of sales in the third quarter. Cost of sales increased for two reasons: increased cost of the silicone IOL and a change in our geographic sales mix," Bailey explained. "A higher unit cost for the silicone IOL is the primary reason for the increased cost. These costs have steadily increased over the past three years on lower production levels, resulting in higher unit costs as the fixed costs are absorbed by fewer units. We expect a significant reduction in unit costs for silicone lenses produced in the first quarter of 2002 as inventory levels fall in line with sales and we increase production.

Late in the third quarter the Company executed an agreement with Canon Inc. and Canon Sales Co., Inc. of Japan resolving all claims between the companies with a non-cash settlement and affirming the joint venture between the companies. "Resolving the differences between Canon and STAAR and reinstating our working relationship was a top priority," Bailey said. "We eliminated monetary liabilities for STAAR, while re-entering the Asian market, among the largest ophthalmic market in the world. We have an outstanding partner whose experience and knowledge of the market provides us with a distinct advantage both near-term and long-term as we move to capitalize on this lucrative opportunity.

"I believe this agreement will have tremendous long-term benefits for both companies and our shareholders." Bailey added, "A key component of our new business strategy is to leverage the Company's superior technology through partnerships like Canon STAAR when the opportunity is present.

During the third quarter the Company negotiated the sale of its French distribution business to a qualified and experienced team led by it's former local management. By completing the sale in the fourth quarter, Staar will maintain it's presence in France, an important European market, eliminating fixed costs for the Company and providing the opportunity for more profitable sales.

During the quarter, the Company strengthened its short to mid-term financing. Wells Fargo Bank extended STAAR's $7.0 million line of credit from October 1, 2001 to January 4, 2002. In addition, STAAR has executed a term sheet for other mid-term financing. Considering its continually improving cash flow position, management believes it will be able to establish financing that is sufficient to fund the Company's operations and business strategy.

Bailey concluded, "The third quarter reflects a company in transition. While we are disappointed with the revenues and earnings shortfall, we are excited about the future. The Company has made significant strides during the quarter in executing its strategic plan with important benchmarks being met in many cases, ahead of schedule. We enter the fourth quarter with strong momentum as we are positioned for increased cash flow from operations and a ramp in revenues."

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

STAAR Surgical Company

Condensed Consolidated Statements of Income

(In 000's except for per share data)

                                        Three Months Ended  Nine Months Ended
                                       Sept. 28, Sept. 29, Sept. 28, Sept. 29,
                                          2001      2000     2001      2000

      Sales                               $12,030  $13,606  $37,714   $40,476
      Royalties                               124       58      331       174
         Total revenues                    12,154   13,664   38,046    40,650

         Total cost of goods sold           5,466    5,354   21,671    20,964

    Gross profit                            6,688    8,310   16,375    19,686

      General and administrative            2,218    1,506    6,832     6,632
      Marketing and selling                 4,444    4,951   15,122    15,613
      Research and development                781      807    2,536     3,040
      Restructuring                             0        0        0    13,776

         Total selling, general and
          administrative expenses:          7,443    7,263   24,490    39,061

    Operating income (loss)                  (755)   1,047   (8,115)  (19,375)

    Total other expense                    (2,300)    (322)  (2,457)   (4,349)

    Income (loss) before income taxes      (3,055)     725  (10,573)  (23,724)

    Income tax provision (benefit)         (1,128)     174   (4,309)   (6,077)

    Minority interest                          64        9      133        62

    Net income (loss)                     ($1,991)    $542  ($6,397) ($17,709)

    Net income (loss) excluding impact of
     non-recurring charges                  ($701)    $542  ($1,157)     $475

    Net  loss per share
      Basic                                $(0.12)   $0.04   $(0.38)   $(1.21)
      Diluted                              $(0.12)   $0.04   $(0.38)   $(1.21)

    Net loss per share excluding impact
     of non-recurring charges
      Basic                                $(0.04)   $0.04   $(0.07)    $0.03
      Diluted                              $(0.04)   $0.04   $(0.07)    $0.03

    Weighted average shares outstanding
      Basic                                16,966   14,837   16,958    14,643
      Diluted                              16,973   15,309   17,023    15,308

    STAAR Surgical Company
    Condensed Consolidated Balance Sheet
    (in 000's)
                                                  Sept. 28,       December 29,
                                                    2001              2001

    Current assets                                 $36,971           $45,474
    Total assets                                    75,207            80,152

    Current liabilities                             20,410            21,171
    Total liabilities                               20,705            21,483
    Stockholders' equity - net                      54,165            58,465
    Total liabilities and equity                   $75,207           $80,152

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SOURCE STAAR Surgical Company

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