“Results for the first quarter compared to the period one year ago clearly demonstrate our continued execution of announced strategies,” said Barry G. Caldwell, president and chief executive officer of STAAR. “Though I would have liked to have seen higher revenue, we have focused our sales and marketing resources on our highest margin product lines, which negatively impacted revenue growth, but led to the continued improvement in our gross margin. Due to a manufacturing issue, now behind us, our gross margin was temporarily reduced by about 130 basis points during the first quarter. At the same time, we have continued to focus on significantly lowering our operating expenses globally. Those efforts have resulted in the reduction of cash used in operations during the quarter to $448,000 from $3.4 million in the prior period. Despite significant legal expenses, we generated adjusted EBITDA of $384,000 during the first quarter. Our net operating loss was $1.1 million for the quarter including non-cash expenses of $1.5 million and legal expenses of $0.7 million.
“During the quarter, we believe we made progress on the key regulatory approvals we are seeking in Japan and the US for the Visian ICL and Visian Toric ICL. While we didn’t generate cash during the quarter as was our goal, we did significantly reduce cash used in operations by 87% from the first quarter of 2008, and 55% from the fourth quarter of 2008. Given that the first quarter is typically our most challenging quarter from a cash from operations perspective, we continue to believe we will generate cash from operations for the full year, continue to improve overall gross margin, decrease operating expense and move to profitability,” added Caldwell.
Financial Performance for the First Quarter Ended April 3, 2009
Total international sales increased to $14.0 million a 9% rise on a constant currency basis and a 5% rise when compared to the $13.4 million reported in the prior year period. STAAR Japan sales grew 10% on a constant currency basis, and 26% on a GAAP reporting basis. Total US sales for the first quarter were $4.2 million, a 6% decrease against sales of $4.5 million last year. US Visian ICL sales grew 24% to $1.4 million, while US IOL sales declined 8% to $2.2 million.
Gross profit for the first quarter was $10.3 million, or 57% of revenue, against $7.8 million, or 43% of revenue, in the prior year period. The gross margin for the first quarter of 2008 was negatively impacted by costs associated with the acquisition of the remaining interests of STAAR Japan. Excluding these costs, gross margin during the first quarter of 2008 was 52%, resulting in a 500 basis point improvement when against 2009. The increase in gross margin was due to the Company’s sales and marketing focus on higher margin products such as ICLs, Preloaded IOLs and NTIOLs and the corresponding decrease in lower margin product sales. Gross margin during the quarter reflects the negative impact of a manufacturing process issue that has since been resolved.
General and administrative expenses for the quarter were $4.3 million, a decrease of 4% when against $4.4 million last year. The decrease resulted from across the board cost reduction efforts implemented during 2008, which were largely offset by legal expenses during the quarter. Legal expenses were about $700,000 for the quarter, which included the cost of trial in the Parallax case.
Marketing and selling expenses for the first quarter dropped about $700,000 to $5.8 million versus $6.5 million in 2009. This 11% decrease was due to reduced salaries, travel, commissions and consulting fees in the US and reduced promotional activities internationally.
Research and development expenses for the quarter were $1.4 million, an 18% decline against the first quarter of 2008. The decrease was due to reduced expenses and reorganization of the Regulatory and Clinical Affairs area, as well as more focused use of resources as we rationalize our global research and development activities.
Non-cash charges for the first quarter of 2009 and 2008 totaled $1.5 million and $5.5 million, respectively. Approximately $5.4 million of the first quarter 2008 net loss was due to purchase accounting charges in the acquisition of STAAR Japan.
On April 3, 2009, the company had total cash of $3.7 million versus $5.0 million at January 2, 2009. During the quarter, cash used in operations totaled $448,000 against $3.4 million in the first quarter of 2008, $2.8 million in the second quarter of 2008, $1.1 million in the third quarter of 2008 and about $1.0 million in the fourth quarter of 2008.
