STAAR Surgical Reports Strong Second Quarter Financial Results Total Sales of $18.2 Million Increased 14% from Q2 2012 / 20% Increase on Constant Currency Basis Visian® ICL™ Sales Grew 31% to Record $11.3 Million Visian ICL with CentraFLOW™ Technology Continues to Drive Growth Company Increases Revenue Growth Metric for the Year GAAP Net Income of $0.01 per share; Non-GAAP Adjusted Net Income of $0.05 per share PR Newswire MONROVIA, Calif., July 31, 2013 MONROVIA, Calif., July 31, 2013 /PRNewswire/ --STAAR Surgical Company (NASDAQ: STAA), a leading developer, manufacturer and marketer of minimally invasive ophthalmic products, today reported revenue for the second quarter ended June 28, 2013 of $18.2 million, which represented 14% growth compared to $15.9 million reported for the second quarter of 2012. The results included sales of $11.3 million of the Company's Visian ICL product portfolio and $5.9 million of its IOL products. In addition, low margin Other Product sales increased to $1.0 million. The effect of foreign currency exchange during the quarter versus prior year second quarter reduced total sales by $1.0 million. On a constant currency basis revenues grew 20% during the second quarter of 2013 compared to the second quarter of 2012. "We delivered a second consecutive quarter of solid revenue growth with some very positive trends that we believe can be built on over the next several quarters," said Barry Caldwell, President and CEO. "In our focused major markets, our Visian ICL continues to gain share over LASIK. We have now successfully implanted over 20,000 ICLs with CentraFLOW and this technology continues to be a key growth driver. During June we received approval of the ICL with CentraFLOW in Argentina and Korea. The ICL with CentraFLOW launch events took place this month in Korea and also in India where we now expect to receive the final product approval during the third quarter. Based upon our experience in Europe, the wider approval range of the Visian ICL with CentraFLOW opens up the refractive market for increased market share gains." "We saw good growth in ICL revenues from all three of our regions despite the continued downward pressure on LASIK," added Mr. Caldwell. "Our European region grew 47% during the quarter driven by the new CentraFLOW technology, productivity from our expanded sales team in the region and the shift to a direct selling model in Spain. Our Asia Pacific region grew Visian ICL sales by 29% which was driven by 77% growth in China. With the growth renewal in China during the quarter that market was our number one market in Visian ICL revenues. During the second half of this year the region will have the new CentraFLOW approvals in Korea and India to drive incremental growth. North America grew ICL revenues by 9%. The U.S. continues to show market share gains as revenue grew 10% while units increased 15% during the quarter. Our competitors promoting LASIK continue to profile the U.S. as a very challenging market for refractive procedures." "We sold our first nanoFLEX™ Toric IOLs in Europe during the quarter with encouraging results. IOL growth overall continued to be negatively impacted by KS IOL product supply and the worsening value of the yen. The negative impact from the value of the yen on IOL sales was $827,000 during the quarter. We had to suspend delivery of our new KS IOL products to China until we have additional supply which is dependent on our third party supplier. This interruption in supply for China resulted in reduced sales of $810,000 as compared to second quarter of 2012 and $347,000 sequentially. Our backorders in Europe increased to $1.2 million at the end of the second quarter." "Our manufacturing consolidation project remained basically on schedule as all IOLs and 21% of myopic ICLs through final inspection were manufactured in Monrovia during June. Throughout this three year process, supply and product quality have remained our priority. As a result of higher than expected demand for the Visian ICL during the first half of the year our ICL inventory levels in Switzerland have declined below our level of comfort. We need to build more ICL units during the second half for both the increased demand and inventory replenishment. In order to accomplish this we have decided to extend completion of our manufacturing consolidation initiative until the first half of 2014. By the end of December we expect to have two thirds of all myopic ICLs and one third of all TICLs manufactured in the U.S. as well as 100% of all IOL products. Production in Switzerland will continue into the first half of next year to build more robust inventory levels for our ICL products and we plan to begin a second shift in Monrovia at the end of August. We do not anticipate this slight shift will interfere with the planned use of all of the NOLs after consolidation," Mr. Caldwell continued. "We remain focused on expanding our market share and gaining additional approvals for our technology in key markets. I am encouraged that we have executed so well against the plan we laid out at the start of this year. While we expect to have continued headwinds due to the yen valuation, as a result of our performance during the first half of the year, and the positive momentum going into the second half of the year, we are increasing our annual revenue growth metric from the original 8 to 10% to the 12 to 14% range," concluded Mr. Caldwell. Gross profit margin for the quarter was 69.5% compared to 69.3% in the second quarter of 2012. The highest gross margin product, the Visian ICL, represented 62% of all revenue during the quarter. Gross margin expansion was limited primarily by a 23% sequential increase in very low margin IOL injector systems sales to a third party supplier for the buildup of their acrylic preloaded product supply, which appears in the Other Product sales category. These sales generated a gross margin considerably below the Company's Visian ICL and IOL product lines gross margins. Those differences accounted for a 150 basis point difference in the gross margin results during the quarter which would have otherwise been 71%. Operating expenses for the second quarter of 2013 were $11.9 million, up 6.4% from the $11.2 million prior year period reflecting $613,000 in related charges associated with the Company's manufacturing consolidation project and a $293,000 increase in sales and marketing expenses driven by the additions to the Company's headcount throughout 2012. The effect of foreign currency exchange on overall operating expenses was a positive $505,000. Income taxes increased to $599,000 during the second quarter of 2013 compared to $327,000 during the second quarter of 2012. The overall tax rate was 68.3% during the quarter and the estimated tax rate for 2013 has been increased to 45% due to the Company's decision to extend the completion date of its manufacturing consolidation project to focus on meeting near term demand. Additionally, the effective tax rate for the quarter was negatively impacted because under GAAP jurisdictions with losses are excluded from the calculation for interim reporting purposes. GAAP net income for the second quarter of 2013 was $278,000, or $0.01 on a per diluted share basis, compared with net loss of $491,000, or $0.01 on a per diluted share basis, in the second quarter of 2012, a $769,000 improvement. Adjusted net income (excluding manufacturing consolidation expenses, gain (loss) on foreign currency transactions, fair value adjustment of warrants, and stock-based compensation expense) for the quarter ended June 28, 2013 was $1.8 million or $0.05 per diluted share versus adjusted net income for the year ago quarter of $1.2 million or $0.03 per diluted share. The reconciliation between GAAP and non-GAAP financial matters is provided with financial tables included with this release. Cash and cash equivalents on June 28, 2013 totaled $19.7 million, compared to $19.2 million at the end of the first quarter of 2013. Cash generation from operations during the quarter was $788,000, which includes the use of $613,000 for the manufacturing consolidation project. The Company also used $799,000 for the purchase of property and equipment and generated $929,000 in proceeds from stock option exercises. For the six month period ended June 28, 2013, sales increased to $36.2 million versus $31.5 million during the first half of 2012, a 15% increase in U.S. dollars and 21% increase in constant currency. Gross profit increased by 15%. Operating expenses increased $1.7 million or 7.6%, which included key investments of $1.5 million for the consolidation project ($262,000 above prior year) and incremental spending of $916,000 in sales and marketing. Operating income increased by $1.7 million during the six month period. Income taxes were $355,000 higher and the new medical device tax was $104,000. Net Income on a GAAP basis was $749,000 or $0.02 per diluted share and the non-GAAP adjusted net income increased to $5.0 million or $0.13 per diluted share basis as compared to $2.6 million or $0.07 per diluted share during the first half of 2012. Recent Visian Implantable Collamer® Lens (ICL) Highlights oICL sales represented 62.0% of total sales, compared to 54.0% of sales in Q2 2012. oICL sales increased 31% to $11.3 million from $8.6 million in Q2 2012 reflecting a 27% increase in unit sales and a 3% increase in price. oOf total Visian ICLs the mix of TICLs was approximately 33% of units and 39% of dollars. oOverall sales in the Company's 11 key markets reflected a 33% increase in revenues and 28% increase in units. oKey regulatory approvals were obtained during the quarter: oVisian ICL with CentraFLOW was approved in Korea and Argentina. oProgress was made in India with approval of the CentraFLOW technology expected within the third quarter. oThe Company has been told by the FDA that the current intent is to take the TICL to the Advisory Panel. A date has not been established and the Company is responding to questions from the FDA and preparing the information needed for the Panel Package necessary for that meeting to occur. Regional ICL Updates Europe, Middle East, Africa (EMEA) oVisian ICL revenues grew by 47% while units increased 30% and price increased 13%. oEurope increased 52% in revenue due to gains from the CentraFLOW technology, and new sales personnel hired in 2012. oSpain grew 127% driven by the conversion from a distributor sales model to a direct model which occurred at the end of second quarter 2012. This provided end customer pricing for the market. Visian ICL unit growth was 100% for the quarter. During the second quarter of 2012 the Company credited the past distributor for their inventory in the market. oStrong growth was also seen in France +41%, Italy +35% and the UK +107%. oThe Middle East revenues grew 37% after a very strong first quarter with the release of the Visian ICL with CentraFLOW. oLatin America grew 39% in revenue. Approval of the ICL with CentraFLOW in Argentina allowed the first orders to be placed late in the quarter. Asia Pacific (APAC) oAPAC grew 29% in revenue while units increased 28% and price increased 1%. oChina returned to more historical growth rates as revenues increased 77% while units increased 82%. The Company believes that the impact of the negative press on LASIK one year ago may now be subsiding. oKorea grew 7% as the distributor prepared for the first sales of the Visian CentraFLOW technology which was approved in late June with the official launch at the end of July. oJapan grew 12% in revenue with unit growth at 17% as revenue was negatively impacted by currency and price. oIndia grew 20% in revenue. Visian CentraFLOW was launched during a key meeting in early June and regulatory approval is expected during the third quarter. North America (NA) oNA increased revenues by 9% while units increased 13% with a 3% decline in price. oSales in the U.S. grew 10% while units grew 15% in a market with increasing evidence that LASIK procedures are declining or flat at best. oA major corporate provider of LASIK procedures reported their refractive procedures declined 10% in the U.S. during Q2 based upon their belief that new flexible spending account guidelines are having a negative impact on elective surgeries. Recent Intraocular Lens (IOL) Highlights oSecond quarter IOL sales were $5.9 million as compared to $6.8 million during the second quarter of 2012. The negative impact of foreign exchange was $827,000 for IOLs. Without the impact of foreign exchange, global IOL revenue would have declined by approximately 1% on a constant currency basis. oIOL gross margin declined from 60% in the second quarter of 2012 to 55% in the current quarter. This was driven primarily by the negative impact of foreign exchange as the preloaded silicone IOLs are cost based in U.S. dollars and primarily sold in yen. If not for this impact the gross margin would have remained at the 60% level for the quarter. oIOLs represented 32% of total sales in the second quarter of 2013, compared to 43% of total sales in the same period of the prior year. oThe Company ended the quarter with approximately $1.2 million in backorders from European customers which is a 30% increase over the backorders at the end of the first quarter. The Company's supplier of acrylic IOLs has been unable to meet the high demand for the new KS IOL products, but is working to increase supply during the second half of the year. oIOL sales in Japan represented 57% of all IOL revenues and 45% of all IOL units. During the quarter there was a 15% increase in units as compared to the second quarter of 2012. Units during the quarter increased by 2% over the first quarter of this year yet revenue declined by 6% due to the weakening of the yen value. In U.S. dollars, this reflects a flat performance to the prior year though a 21% increase in constant currency. oDue to the lack of supply in the KS IOL products, the Company has suspended delivery of product to the China market. IOL revenues during the second quarter were $810,000 less than prior year and $347,000 less than the first quarter of this year. oShipments of the nanoFLEX Toric IOL began late in the quarter to customers in Europe. oThe newly enhanced nanoFLEX II IOLs were shipped along with the reading cards for the clinical trials which started during July. The protocol is designed to measure near and intermediate visual results as well as rotational stability. Project Comet Update oThe Company's manufacturing consolidation project continued to be basically on plan through the first half of the year. The Company has decided that due to the higher demand needs resulting from increased sales of the Visian ICL products and the expected Visian Preloaded V5 ICL approval for Europe, to extend the completion date for consolidation until the first half of 2014. oValidations were successfully completed for the Visian Toric ICLs as expected and the Company plans to ship the first TICLs from Monrovia during the third quarter. oSterile IOLs began shipping from Monrovia to Japan during the quarter and the Company exited the quarter with all IOLs globally being manufactured in Monrovia. oManufacturing consolidation expenses were $613,000, as compared to $697,000 reported in the second quarter of 2012. Costs associated with the wind down of manufacturing operations in Japan are expected to decrease in the second half of the year. 2013 Metrics- Revenue Growth Metric Increased; Manufacturing Consolidation Extended The Company updated its metrics as follows and will continue to report and update on each of the 2013 metrics quarterly: oTotal revenue growth in the range of 12 to 14%, up from an original metric of 8 to 10%. oGross margin expansion by a minimum of 250 bps for the year. oProfitable on a GAAP basis each quarter. oContinuous quarterly progress toward the full implementation of manufacturing consolidation from Japan and Switzerland facilities to the U.S. The timetable for complete implementation of this program has been extended to the first half of 2014. During the month of December the Company expects to have 100% of all IOL production, two thirds of ICLs and one third of TICLs manufactured in the U.S. Conference Call The Company will host a conference call and video webcast today, July 31, 2013 at 4:30 p.m. Eastern / 1:30 p.m. Pacific to discuss the Company's second quarter 2013 financial results and recent corporate developments. The dial-in number for the conference call is 877-703-6105 for domestic participants and 857-244-7304 for international participants, both using a passcode 23510067. The Company will also be using slides to illustrate its second quarter results and operational progress. The slides and live webcast of the call can be accessed from the investor relations section of the STAAR website at www.staar.com. A taped replay of the conference call will also be available beginning approximately one hour after the call's conclusion and will be available for seven days. This replay can be accessed by dialing 888-286-8010 for domestic callers and 617-801-6888 for international callers, both using passcode 40120994. An archived webcast will also be available at www.staar.com. Use of Non-GAAP Financial Measures This press release includes supplemental non-GAAP financial information, which STAAR believes investors will find helpful in understanding its operating performance. The Company conducts a significant part of its activities outside the U.S. It receives sales revenue and pays expenses principally in U.S. dollars, Swiss francs, Japanese yen and Euros. The exchange rates between dollars and non-U.S. currencies can fluctuate greatly and can have a significant effect on our results when reported in U.S. dollars. When preparing its financial statements in conformance with GAAP, the Company translates foreign currency sales and expenses denominated in Japanese yen to dollars at the weighted average of exchange rates in effect during the period. As a result, the Company's reported performance may be significantly affected by currency fluctuations. In order to compare the Company's performance from period to period without the effect of currency, the Company will apply the same average exchange rate applicable in the prior period, or the "constant currency" rate to sales or expenses in the current period as well. Because changes in currency are outside of the control of the Company and its managers, management finds this non-GAAP measure useful in determining the long term progress of its initiatives and determining whether its managers are achieving their performance goals. The Company believes that the non-GAAP constant-currency sales results measures provided in this press release are similarly useful to investors to give insight on long term trends in the Company's performance without the external effect of changes in relative currency values. The table below shows sales results calculated in accordance with GAAP, the effect of currency, and the resulting non-GAAP measure expressed in constant currency. "Adjusted Net Income" excludes the following items that are included in "Net Income" as calculated in accordance with U.S. generally accepted accounting principles ("GAAP"): manufacturing consolidation expenses, Spain distribution transition expenses, gain or loss on foreign currency transactions, the fair value adjustment of outstanding warrants issued in 2007, and stock-based compensation expenses. We believe that "Adjusted Net Income" is useful to investors in gauging the outcome of the key drivers of our business performance: our ability to increase sales revenue and our ability to increase profit margin by improving the mix of high value products while reducing the costs over which we have control. We have excluded manufacturing consolidation and Spain distribution transition expenses because these are non-recurring expenses and their inclusion may mask underlying trends in our business performance. Expenses associated with the Company's plans to consolidate its manufacturing operations to the U.S. are largely expected to be completed at the end of 2013 and the Spain distribution transition expenses were completed at the end of the first quarter of 2013. We have excluded gains and losses on foreign currency transactions and the fair value adjustment of warrants because of the significant fluctuations that can result from period to period as a result of market driven factors. Stock-based compensation expenses consist of expenses for stock options and restricted stock under Statement of Financial Accounting Standards ("SFAS") No.123R. In calculating Adjusted Net Income STAAR excludes these expenses and the fair value adjustment of outstanding warrants because they are non-cash expenses and because of the complexity and considerable judgment involved in calculating their values. In addition, these expenses tend to be driven by fluctuations in the price of our stock and not by the same factors that generally affect our other business expenses. We have provided below a detailed reconciliation table, which is useful to investors in providing the context to understand our Adjusted Net Income and how it differs from Net Income calculated in accordance with GAAP. About STAAR Surgical STAAR, which has been dedicated solely to ophthalmic surgery for over 25 years, designs, develops, manufactures and markets implantable lenses for the eye and delivery systems therefor. All of these lenses are foldable, which permits the surgeon to insert them through a small incision. STAAR's lens used in refractive surgery as an alternative to LASIK is called an Implantable Collamer® Lens or "ICL." A lens used to replace the natural lens after cataract surgery is called an intraocular lens or "IOL." Over 350,000 Visian ICLs have been implanted to date; to learn more about the ICL go to: www.visianinfo.com. STAAR has approximately 300 full time employees and markets lenses in over 60 countries. Headquartered in Monrovia, CA, it manufactures in the following locations: Nidau, Switzerland; Ichikawa City, Japan; Aliso Viejo, CA; and Monrovia, CA. For more information, please visit the Company's website at www.staar.com or call 626-303-7902. Collamer® is the registered trademark for STAAR's proprietary biocompatible collagen copolymer lens material. Safe Harbor All statements in this press release that are not statements of historical fact are forward-looking statements, including statements about any of the following: any projections of earnings, revenue, sales, profit margins, cash, effective tax rate or any other financial items; the plans, strategies, and objectives of management for future operations or prospects for achieving such plans; metrics for 2013; statements regarding new products, including but not limited to, expectations for success of new products in the U.S. or international markets or government approval of new products; future economic conditions or size of market opportunities; expected IOL backorder position; expected costs of Monrovia facility expansion; expected costs and savings from business consolidation plans and the timetable for those plans; statements of belief, including as to achieving 2013 growth plans or metrics; expected regulatory activities and approvals, product launches, and any statements of assumptions underlying any of the foregoing. Important additional factors that could cause actual results to differ materially from those indicated by such forward-looking statements are set forth in the company's Annual Report on Form 10-K for the year ended December 28, 2012, under the caption "Risk Factors," which is on file with the Securities and Exchange Commission and available in the "Investor Information" section of the company's website under the heading "SEC Filings." These statements are based on expectations and assumptions as of the date of this press release and are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties include the following: our limited capital resources and limited access to financing; the negative effect of unstable global economic conditions on sales of products, especially products such as the ICL used in non-reimbursed elective procedures; the challenge of managing our foreign subsidiaries; backlog as we prepare for our manufacturing facility consolidation; the risk of unfavorable changes in currency exchange rate; the discretion of regulatory agencies to approve or reject new products, or to require additional actions before approval; unexpected costs or delays that could reduce or eliminate the expected benefits of our consolidation plans; the risk that research and development efforts will not be successful or may be delayed in delivering for launch; the purchasing patterns of our distributors carrying inventory in the market; the willingness of surgeons and patients to adopt a new product and procedure; patterns of Visian ICL use that have typically limited our penetration of the refractive procedure market, and a general decline in the demand for refractive surgery particularly in the U.S. and the Asia Pacific region, which STAAR believes has resulted from both concerns about the safety and effectiveness of laser procedures and current economic conditions. The Visian Toric ICL and the Visian ICL with CentraFLOW are not yet approved for sale in the United States. CONTACT: Investors Media EVC Group EVC Group Douglas Sherk, 415-652-9100 Chris Gale, 646-201-5431 Leigh Salvo, 415-568-9348 STAAR Surgical Company Condensed Consolidated Balance Sheets (in 000's) Unaudited June 28, December 28, ASSETS 2013 2012 Current assets: Cash and cash equivalents $ 19,725 $ 21,675 Accounts receivable trade, net 10,342 8,543 Inventories, net 11,123 11,673 Prepaids, deposits, and other current assets 2,624 2,183 Total current assets 43,814 44,074 Property, plant, and equipment, net 6,147 5,439 Intangible assets, net 1,689 2,142 Goodwill 1,786 1,786 Deferred income taxes 189 187 Other assets 1,041 1,131 Total assets $ 54,666 $ 54,759 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Line of credit $ 5,100 $ 5,850 Accounts payable 3,809 5,129 Deferred income taxes 440 439 Obligations under capital leases 525 829 Other current liabilities 5,546 5,702 Total current liabilities 15,420 17,949 Obligations under capital leases 276 488 Deferred income taxes 1,014 885 Asset retirement obligations 386 707 Pension liability 2,909 2,988 Total liabilities 20,005 23,017 Stockholders' equity: Common stock 366 364 Additional paid-in capital 165,327 162,251 Accumulated other comprehensive income 671 1,580 Accumulated deficit (131,703) (132,453) Total stockholders' equity 34,661 31,742 Total liabilities and stockholders' equity $ 54,666 $ 54,759 STAAR Surgical Company Condensed Consolidated Statements of Operations (In 000's except for per share data) Unaudited Three Months Ended Six Months Ended % of June % of June Fav (Unfav) % of June % of June Fav (Unfav) 28, 29, 28, 29, Sales 2013 Sales 2012 Amount % Sales 2013 Sales 2012 Amount % Net sales 100.0% $18,164 100.0% $15,942 $ 13.9% 100.0% $36,165 100.0% $31,451 $ 4,714 15.0% 2,222 Cost of sales 30.5% 5,544 30.7% 4,897 (647) -13.2% 30.1% 10,891 30.2% 9,504 (1,387) -14.6% Gross profit 69.5% 12,620 69.3% 11,045 1,575 14.3% 69.9% 25,274 69.8% 21,947 3,327 15.2% Selling, general and administrative expenses: General and 21.6% 3,923 22.7% 3,633 (290) -8.0% 21.8% 7,881 23.8% 7,493 (388) -5.2% administrative Marketing 31.2% 5,659 33.7% 5,366 (293) -5.5% 30.3% 10,945 31.9% 10,029 (916) -9.1% and selling Research and 9.3% 1,686 9.5% 1,513 (173) -11.4% 8.4% 3,052 9.7% 3,059 7 0.2% development Medical 0.2% 45 0.0% 0 (45) -100.0% 0.3% 104 0.0% 0 (104) -100.0% device tax Selling, general, and 62.3% 11,313 65.9% 10,512 (801) -7.6% 60.8% 21,982 65.4% 20,581 (1,401) -6.8% administrative expenses Other general and 3.4% 613 4.4% 697 84 12.1% 4.2% 1,514 4.0% 1,252 (262) -20.9% administrative expenses Total selling, general and 65.7% 11,926 70.3% 11,209 (717) -6.4% 65.0% 23,496 69.4% 21,833 (1,663) -7.6% administrative expenses Operating 3.8% 694 -1.0% (164) 858 523.2% 4.9% 1,778 0.4% 114 1,664 1459.6% income (loss) Other income (expense): Interest 0.0% 8 0.0% 7 1 14.3% 0.0% 15 0.0% 7 8 114.3% income Interest -0.2% (41) -0.4% (67) 26 38.8% -0.3% (96) -0.5% (162) 66 40.7% expense Gain (loss) on foreign 0.4% 77 -1.6% (249) 326 130.9% -0.7% (264) -0.6% (182) (82) -45.1% currency transactions Other 0.8% 139 1.9% 309 (170) -55.0% 0.6% 230 1.7% 523 (293) -56.0% income, net Total other income 1.0% 183 0.0% 0 183 100.0% -0.3% (115) 0.6% 186 (301) -161.8% (expense), net Income (loss) before 4.8% 877 -1.0% (164) 1,041 634.8% 4.6% 1,663 1.0% 300 1,363 -454.3% provision for income taxes Provision for 3.3% 599 2.2% 327 (272) -83.2% 2.5% 914 1.9% 559 (355) -63.5% income taxes Net income 1.5% $ -3.1% $ $ 156.6% 2.1% $ -0.8% $ $ 1,008 389.2% (loss) 278 (491) 769 749 (259) Net income $ $ $ $ (loss) per 0.01 (0.01) 0.02 (0.01) share - basic Net income (loss) per $ $ $ $ share - 0.01 (0.01) 0.02 (0.01) diluted Weighted average shares 36,496 36,257 36,461 36,164 outstanding - basic Weighted average shares 38,342 36,257 37,887 36,164 outstanding - diluted STAAR Surgical Company Condensed Consolidated Statements of Cash Flows (in 000's) Unaudited Six Months Ended June 28, June 29, 2013 2012 Cash flows from operating activities: Net income (loss) $ 749 $ (259) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation of property and equipment 840 627 Amortization of intangibles 225 350 Deferred income taxes 129 82 Fair value adjustment of warrant (27) (207) Loss on disposal of property and equipment 59 31 Stock-based compensation expense 2,019 1,481 Change in net pension liability 57 136 Accretion of asset retirement obligation 7 - Other 111 71 Changes in working capital: Accounts receivable trade, net (2,229) 334 Inventories 71 (344) Prepaids, deposits and other current assets (507) (138) Accounts payable (1,123) (1,089) Other current liabilities (25) 153 Net cash provided by operating activities 356 1,228 Cash flows from investing activities: Acquisition of property and equipment (2,017) (833) Decrease in restricted cash, including - 129 reinvested interest Net cash used in investing activities (2,017) (704) Cash flows from financing activities: Repayment of capital lease lines of credit (478) (438) Proceeds from exercise of stock options 952 950 Net cash provided by financing activities 474 512 Effect of exchange rate changes on cash and cash (763) (74) equivalents Increase (decrease) in cash and cash equivalents (1,950) 962 Cash and cash equivalents, at beginning of the period 21,675 16,582 Cash and cash equivalents, at end of the period $19,725 $17,544 STAAR Surgical Company Global Sales (in 000's) Unaudited Three Months Ended Year Ended June June % June June % 28, 29, Change 28, 29, Change Geographic 2013 2012 Fav 2013 2012 Fav Sales (Unfav) (Unfav) United States 17.4% $ 20.2% $ -1.9% 17.7% $ 20.3% $ 0.1% 3,154 3,216 6,394 6,390 Japan 25.6% 4,648 25.7% 4,094 13.5% 25.9% 9,387 25.3% 7,951 18.1% Korea 10.1% 1,834 10.8% 1,721 6.6% 10.7% 3,869 11.5% 3,624 6.8% China 12.3% 2,230 13.4% 2,141 4.2% 11.9% 4,301 13.5% 4,247 1.3% Spain 6.4% 1,163 3.3% 531 119.0% 6.8% 2,454 3.3% 1,041 135.7% Other 28.2% 5,135 26.6% 4,239 21.1% 27.0% 9,760 26.1% 8,198 19.1% Total International 82.6% 15,010 79.8% 12,726 17.9% 82.3% 29,771 79.7% 25,061 18.8% Sales Total 100.0% $ 100.0% $ 13.9% 100.0% $ 100.0% $ 15.0% Sales 18,164 15,942 36,165 31,451 Product Sales Core products ICLs 62.0% $ 54.0% $ 30.9% 60.5% $ 54.7% $ 27.2% 11,261 8,606 21,892 17,211 IOLs 32.3% 5,863 42.5% 6,774 -13.4% 33.8% 12,211 41.8% 13,132 -7.0% Total core 94.3% 17,124 96.5% 15,380 11.3% 94.3% 34,103 96.5% 30,343 12.4% products Non-core products Other 5.7% 1,040 3.5% 562 85.1% 5.7% 2,062 3.5% 1,108 86.1% Total 100.0% $ 100.0% $ 13.9% 100.0% $ 100.0% $ 15.0% Sales 18,164 15,942 36,165 31,451 STAAR Surgical Company Reconciliation of Non-GAAP Financial Measure (in 000's) Unaudited Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, 2013 2012 2013 2012 Net income (loss) - (as reported) $ 278 $ (491) $ 749 $ (259) Less: Manufacturing consolidation 613 697 1,514 $ 1,252 expenses Spain distribution transition - 173 442 $ 173 cost Foreign currency impact (77) 249 264 $ 182 Fair value adjustment of - (222) (27) $ (207) warrants Stock-based compensation expense 985 794 2,019 $ 1,481 Net income - (adjusted) $ 1,799 $ 1,200 $ 4,961 $ 2,622 Net income (loss) per share, basic $ 0.01 $ (0.01) $ 0.02 $ (0.01) - (as reported) Manufacturing consolidation $ 0.02 $ 0.02 $ 0.04 $ 0.03 expenses Spain distribution transition $ - $ 0.00 $ 0.01 $ 0.00 cost Foreign currency impact $ (0.00) $ 0.01 $ 0.01 $ 0.01 Fair value adjustment of $ - $ (0.01) $ (0.00) $ (0.01) warrants Stock-based compensation expense $ 0.03 $ 0.02 $ 0.06 $ 0.04 Net income per share, basic - $ 0.05 $ 0.03 $ 0.14 $ 0.07 (adjusted) Net income (loss) per share, $ 0.01 $ (0.01) $ 0.02 $ (0.01) diluted - (as reported) Manufacturing consolidation $ 0.02 $ - $ 0.04 $ 0.03 expenses Spain distribution transition $ - $ 0.02 $ 0.01 $ 0.00 cost Foreign currency impact $ (0.00) $ 0.00 $ 0.01 $ 0.00 Fair value adjustment of $ - $ 0.01 $ (0.00) $ (0.01) warrants Stock-based compensation expense $ 0.03 $ (0.01) $ 0.05 $ 0.04 Net income per share, diluted - $ 0.05 $ 0.03 $ 0.13 $ 0.07 (adjusted) Weighted average shares 36,496 36,257 36,461 36,164 outstanding - Basic Weighted average shares 38,342 38,369 37,887 38,406 outstanding - Diluted Note: Net income per share (adjusted), basic and diluted, may not add up due to rounding STAAR Surgical Company Reconciliation of Non-GAAP Financial Measure Constant Currency Sales (in 000's) Unaudited Three Months Ended GAAP Sales June Effect Constant June As Reported Constant 28, of 29, Currency 2013 Currency Currency 2012 $ % $ % Change Change Change Change ICL $ $ $ 11,302 $ $ 31% $ 31% 11,261 41 8,606 2,655 2,696 IOL 5,863 827 6,690 6,774 (911) -13% (84) -1% Other 1,040 143 1,183 562 478 85% 621 110% Total $ $ $ 19,175 $15,942 $ 14% $ 20% Sales 18,164 1,011 2,222 3,233 Six Months Ended GAAP Sales June Effect Constant June As Reported Constant 28, of 29, Currency 2013 Currency Currency 2012 $ % $ % Change Change Change Change ICL $ $ $ 21,966 $17,211 $ 27% $ 28% 21,892 74 4,681 4,755 IOL 12,211 1,473 13,684 13,132 (921) -7% 552 4% Other 2,062 213 2,275 1,108 954 86% 1,167 105% Total $ $ $ 37,925 $31,451 $ 15% $ 21% Sales 36,165 1,760 4,714 6,474 SOURCE STAAR Surgical Company Website: http://www.staar.com
STAAR Surgical Reports Strong Second Quarter Financial Results
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