Synergetics USA: Shift in Corporate Strategy Yields Strong First Quarter Results

Synergetics USA reported first quarter revenues of $12.2 million, an increase of 17% over the year ago period. More compelling was the increase in net income: $661,000 in the most recent quarter compared to $397,000 in Q1 2008, a 66% improvement.

In the past year, the Synergetics team, led by Chairman Robert Dick, has implemented various programs that have helped grow top-line revenue, reduce debt, increase profitability and improve operational efficiencies.

Products introductions (over the past two years) now account for 21% of total sales. In November 2007, Synergetics launched a lower priced electrosurgical generator, Malis. The effort was needed after competing manufacturers flattened the formerly healthy margins of its premium product line. The new unit fills the price gap created by its coagulation only unit, COAG, and the up-market Advantage, named DualWave.

“This unit will provide us with selling options, especially when confronted with the price compression that we’ve seen from competitors,” said Gregg D. Scheller, former President and CEO. “[Malis] can be produced at a much lower cost and will offer an alternative to those customers who are not interested in the full featured Advantage.”

An eye on margins also led to the March 2008 closing of a Philadelphia plant. Synergetics moved production of its electrosurgical generators to O’Fallon Missouri, an effort that could cut costs by as much as $1.5 million annually.

Synergetics USA was formed in the September 2005 merger of Valley Forge Scientific Corp. and Synergetics, Inc. The company designs, manufactures and markets medical devices for use primarily in ophthalmic surgery and neurosurgery. Synergetics also is active in the pain-management and dental markets.

As of October 29, 2008, cash and cash equivalents at Synergetics totaled $446,000. The company has access to an additional $6.6 million under existing lines of credit. During the quarter, the company paid down 4% of its outstanding debt; long term liabilities now total $9.8 million.

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