Synergetics U.S.A. Inc
), a manufacturer of microsurgical devices for ophthalmic and
neurosurgical applications, reported its third quarter fiscal 2012
adjusted earnings of 5 cents per share, only a penny ahead of the
Zacks Consensus Estimate. This compared unfavorably with the
year-ago earnings of 7 cents. Adjusted earnings exclude the
inventory write-down expense of 1 cent a share.
Profit for the quarter declined 40% year over year to $1.0
million on a GAAP basis (or 4 cents a share) as operating expenses
and costs of sale edged up.
Revenues decreased 0.7% year over year to $14.6 million, missing
the Zacks Consensus Estimate of $15 million. However, revenues
increased 0.6% year over year barring the unfavorable currency
translation impact of approximately $0.2 million in the reported
quarter. Healthy growth across the company's Original Equipment
Manufacturer (OEM) category was largely offset by the decline in
On a geographic basis, revenues in the domestic market grew 9.0%
year over year to $10.8 million, backed by robust OEM sales in the
quarter. On an international level, revenues fell 21.1% (down 17.1%
in terms of constant currency) to $3.7 million from the year-ago
period. Though Germany posted low double-digit growth, sluggish
organic growth in the rest of Europe due to macroeconomic
conditions and Canada hampered the company's performance.
Revenues from the Ophthalmic category -- a Synergetics mainstay
-- dropped 8.8% year over year to $8.4 million in the reported
quarter. Sales increased by 1.3% in the U.S. while international
sales declined 18.9% from the year-ago period. The domestic market
sales benefited from robust sales of disposable products,
especially VersaPACK kits.
OEM sales jumped 17.0% year over year to $6 million, including
the sales to marketing partners. Growth was backed by strong sales
of disposable products to
). Synergetics' partnership with Mobius Therapeutics also boosted
the OEM sales performance. This was partially offset by production
and ordering delays.
Synergetics Disposable products sales grew 2.5% year over year
to $12.1 million in the reported quarter of 2012. Capital Equipment
sales dipped 16.9% from the year-ago quarter to $2.1 million.
Gross margin was 53.7% versus 58.6% in the year-ago period. The
decline in gross margin is attributed to the inventory write-down
expenses of more than $0.3 million, shift in product mix and
unfavorable currency translation.
Adjusted operating margin decreased to 12.2% compared to 17.2%
during the year-ago quarter. The rise in operating expense and
increased cost of goods sold, coupled with reduced sales negatively
affected the operating margin.
Selling and marketing expenses as a percentage of sales came in
at 19.7% compared to 18.9% in the year-ago period. General and
administrative expenses as a percentage of sales came in at 18.0%
compared to 16.5% of the previous year. Research and development
(R&D) expense (as a percentage of sales) fell slightly to 6.3%
from 6.0% in the year-ago quarter.
Synergetics exited third quarter of fiscal 2012 with cash and
cash equivalents of $12.8 million, 24.4% lower than the previous
year. The company had no long-term debt for the reported
The company faces a tough competitive landscape, which
includes competitors like
). Synergetics performed lower than expected for the quarter. The
stock currently retains a Zacks #4 Rank, which translates into a
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