##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended May 4, 2009
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR
THE TRANSITION PERIOD FROMTO
 Commission file number 001-10382
 SYNERGETICS USA, INC.
  Delaware
    
    20-5715943(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 3845 Corporate Centre DriveOFallon, Missouri
    
    63368(Address of principal executive offices)
    
    (Zip Code)
  (Registrants Telephone Number, Including Area Code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




---



##### 



PagePART I Financial InformationItem 1. Unaudited Condensed Consolidated Financial Statements
    
    
    3Balance Sheets  May 4, 2009 and July 31, 2008
    
    
    3Statements of Income for the three and nine months ended May
4, 2009 and April 30, 2008
    
    
    4Statements of Cash Flows for the nine months ended May 4,
2009 and April 30, 2008
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    22PART II Other InformationItem 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3. Defaults Upon Senior Securities
    
    
    23Item 4. Submission of Matters to a Vote of Security Holders
    
    
    24Item 5. Other Information
    
    
    24Item 6. Exhibits
    
    
    24Signatures
    
    
    25Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002EX-31.1EX-31.2EX-32.1EX-32.2
  2




---



##### Table of Contents



Part I  Financial Information
 
 Item 1  Unaudited Condensed Consolidated Financial Statements
 Synergetics USA, Inc. and Subsidiaries
 
 Condensed Consolidated Balance Sheets
 As of May 4, 2009 (Unaudited) and July 31, 2008
 (Dollars in thousands, except share data)
 May 4, 2009
    
    
    July 31, 2008AssetsCurrent AssetsCash and cash equivalents
    
    $
    603
    
    
    $
    500Accounts receivable, net of allowance for
doubtful accounts of approximately $286 and
$250, respectively
    
    
    8,499
    
    
    
    8,593Income taxes receivable
    
    
    75
    
    
    
    Inventories
    
    
    16,329
    
    
    
    14,568Prepaid expenses
    
    
    606
    
    
    
    361Deferred income taxes
    
    
    710
    
    
    
    527Total current assets
    
    
    26,822
    
    
    
    24,549Property and equipment, net
    
    
    8,031
    
    
    
    8,159Goodwill
    
    
    10,690
    
    
    
    10,690Other intangible assets, net
    
    
    13,338
    
    
    
    13,946Patents, net
    
    
    1,025
    
    
    
    991Deferred expenses
    
    
    4
    
    
    
    6Cash value of life insurance
    
    
    55
    
    
    
    55Total assets
    
    $
    59,965
    
    
    $
    58,396Liabilities and Stockholders EquityCurrent LiabilitiesExcess of outstanding checks over bank balance
    
    $
    396
    
    
    $
    Lines-of-credit
    
    
    7,216
    
    
    
    3,287Current maturities of long-term debt
    
    
    1,848
    
    
    
    1,823Current maturities of revenue bonds payable
    
    
    249
    
    
    
    249Accounts payable
    
    
    1,603
    
    
    
    2,776Accrued expenses
    
    
    2,107
    
    
    
    2,659Income taxes payable
    
    
    
    
    
    
    1,071Total current liabilities
    
    $
    13,419
    
    
    $
    11,865Long-Term LiabilitiesLong-term debt, less current maturities
    
    
    2,932
    
    
    
    4,309Revenue bonds payable, less current maturities
    
    
    3,456
    
    
    
    3,642Deferred income taxes
    
    
    2,096
    
    
    
    2,223Total long-term liabilities
    
    
    8,484
    
    
    
    10,174Total liabilities
    
    
    21,903
    
    
    
    22,039Commitments and contingencies (Note 6)Stockholders EquityCommon stock at May 4, 2009 and July
31, 2008, $.001 par value, 50,000,000 shares
authorized; 24,484,053 and 24,354,295
shares issued and outstanding, respectively
    
    
    24
    
    
    
    24Additional paid-in capital
    
    
    24,538
    
    
    
    24,342Retained earnings
    
    
    13,500
    
    
    
    11,991Total stockholders equity
    
    
    38,062
    
    
    
    36,357Total liabilities and stockholders equity
    
    $
    59,965
    
    
    $
    58,396
  3




---



##### Table of Contents



Synergetics USA, Inc. and Subsidiaries
 
 Unaudited Condensed Consolidated Statements of Income
 Three and Nine Months Ended May 4, 2009 and April 30, 2008
 (Dollars in thousands, except per share information)
 Three Months Ended
    
    
    Three Months Ended
    
    
    Nine Months Ended
    
    
    Nine Months EndedMay 4, 2009
    
    
    April 30, 2008
    
    
    May 4, 2009
    
    
    April 30, 2008Sales
    
    $
    13,161
    
    
    $
    13,500
    
    
    $
    39,059
    
    
    $
    35,606Cost of sales
    
    
    5,760
    
    
    
    5,330
    
    
    
    16,737
    
    
    
    14,491Gross profit
    
    
    7,401
    
    
    
    8,170
    
    
    
    22,322
    
    
    
    21,115Operating expensesResearch and development
    
    
    741
    
    
    
    748
    
    
    
    2,248
    
    
    
    1,895Selling and marketing expenses
    
    
    3,557
    
    
    
    3,094
    
    
    
    10,740
    
    
    
    9,421General and administrative
    
    
    2,224
    
    
    
    2,173
    
    
    
    6,385
    
    
    
    6,6276,522
    
    
    
    6,015
    
    
    
    19,373
    
    
    
    17,943Operating income
    
    
    879
    
    
    
    2,155
    
    
    
    2,949
    
    
    
    3,172Other income (expense)Interest income
    
    
    
    
    
    
    2
    
    
    
    3
    
    
    
    6Interest expense
    
    
    (219
    )
    
    
    (347
    )
    
    
    (622
    )
    
    
    (911
    )Miscellaneous
    
    
    1
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    17(218
    )
    
    
    (346
    )
    
    
    (620
    )
    
    
    (888
    )Income before provision
for Income taxes
    
    
    661
    
    
    
    1,809
    
    
    
    2,329
    
    
    
    2,284Provision for income taxes
    
    
    203
    
    
    
    692
    
    
    
    820
    
    
    
    824Net income
    
    $
    458
    
    
    $
    1,117
    
    
    $
    1,509
    
    
    $
    1,460Earnings per share:Basic
    
    $
    0.02
    
    
    $
    0.05
    
    
    $
    0.06
    
    
    $
    0.06Diluted
    
    $
    0.02
    
    
    $
    0.05
    
    
    $
    0.06
    
    
    $
    0.06Basic weighted-average common
shares outstanding
    
    
    24,470,755
    
    
    
    24,321,274
    
    
    
    24,454,483
    
    
    
    24,310,211Diluted weighted-average
common shares outstanding
    
    
    24,471,258
    
    
    
    24,396,183
    
    
    
    24,492,374
    
    
    
    24,441,241
  4




---



##### Table of Contents



Synergetics USA, Inc. and Subsidiaries
 
 Unaudited Condensed Consolidated Statements of Cash Flows
 Nine months Ended May 4, 2009 and April 30, 2008
 (Dollars in thousands)
 Nine Months Ended
    
    
    Nine Months EndedMay 4, 2009
    
    
    April 30, 2008Cash Flows from Operating ActivitiesNet income
    
    $
    1,509
    
    
    $
    1,460Adjustments to reconcile net income to net cash provided by
(used in) operating activitiesDepreciation and amortization
    
    
    1,366
    
    
    
    1,495Provision for doubtful accounts receivable
    
    
    36
    
    
    
    43Stock-based compensation
    
    
    196
    
    
    
    167Deferred income taxes
    
    
    (310
    )
    
    
    (119
    )Loss on sale of assets
    
    
    
    
    
    
    5Change in assets and liabilities:(Increase) decrease in:Accounts receivable
    
    
    58
    
    
    
    (555
    )Income taxes receivable
    
    
    (75
    )
    
    
    473Inventories
    
    
    (1,761
    )
    
    
    (282
    )Prepaid expenses
    
    
    (245
    )
    
    
    (130
    )Increase (decrease) in:Accounts payable
    
    
    (1,173
    )
    
    
    (439
    )Accrued expenses
    
    
    (552
    )
    
    
    (55
    )Income taxes payable
    
    
    (1,071
    )
    
    
    187Net cash (used in) provided by operating activities
    
    
    (2,022
    )
    
    
    2,250Cash Flows from Investing Activities(Increase) decrease in deferred expenses
    
    
    2
    
    
    
    (57
    )Proceeds from sale of equipment
    
    
    
    
    
    
    19Purchase of property and equipment
    
    
    (560
    )
    
    
    (779
    )Acquisition of patents and other intangibles
    
    
    (104
    )
    
    
    (162
    )Net cash used in investing activities
    
    
    (662
    )
    
    
    (979
    )Cash Flows from Financing ActivitiesExcess of outstanding checks over bank balance
    
    
    396
    
    
    
    (295
    )Net borrowings on lines-of-credit
    
    
    3,929
    
    
    
    779Principal payments on revenue bonds payable
    
    
    (186
    )
    
    
    (187
    )Principal payments on long-term debt
    
    
    (956
    )
    
    
    (1,247
    )Payments on debt incurred for acquisition of trademark
    
    
    (396
    )
    
    
    (372
    )Proceeds from stock options exercised
    
    
    
    
    
    
    22Net cash provided by (used in) financing activities
    
    
    2,787
    
    
    
    (1,300
    )Net increase (decrease) in cash and cash equivalents
    
    
    103
    
    
    
    (29
    )Cash and cash equivalentsBeginning
    
    
    500
    
    
    
    167Ending
    
    $
    603
    
    
    $
    138
  5




---



##### Table of Contents



Synergetics USA, Inc. and Subsidiaries
 
 Notes to Unaudited Condensed Consolidated Financial Statements
 (Tabular information reflects dollars in thousands, except share and per share information)
 Note 1. General
 Nature of business:
 Reporting period:
 Basis of presentation:
 Note 2. Summary of Significant Accounting Policies
   Reclassifications
 6




---



##### Table of Contents



Note 3. Product Development and Marketing Agreements
  Codman & Shurtleff, Inc. (Codman)
 ®
  Note 4. Stock-Based Compensation
 Stock Option Plans
  Nine Months Ended May 4, 2009Weighted-Average
    
    
    Weighted-Exercise
    
    
    AverageShares
    
    
    Price
    
    
    Fair ValueOptions outstanding, beginning of period
    
    
    436,735
    
    
    $
    2.35
    
    
    $
    1.94For the period from August 1, 2008 through May 4, 2009:Granted
    
    
    93,000
    
    
    
    0.95
    
    
    
    0.75Forfeited
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    Options outstanding, end of period
    
    
    529,735
    
    
    $
    2.11
    
    
    $
    1.73Options exercisable, end of period
    
    
    419,880
    
    
    $
    2.39
    
    
    $
    1.97
  Expected average risk-free interest rate
    
    
    1.5
    %Expected average life (in years)
    
    
    5Expected volatility
    
    
    69.2
    %Expected dividend yield
    
    
    0.0
    %
  7




---



##### Table of Contents



Restricted Stock Plans
  Note 5. Supplemental Balance Sheet Information
 Inventories
 May 4, 2009
    
    
    July 31, 2008Raw material and component parts
    
    $
    6,155
    
    
    $
    5,440Work-in-progress
    
    
    3,478
    
    
    
    2,529Finished goods
    
    
    6,696
    
    
    
    6,599$
    16,329
    
    
    $
    14,568
 Property and equipment
 May 4, 2009
    
    
    July 31, 2008Land
    
    $
    730
    
    
    $
    730Building and improvements
    
    
    5,751
    
    
    
    5,720Machinery and equipment
    
    
    5,226
    
    
    
    4,959Furniture and fixtures
    
    
    716
    
    
    
    680Software
    
    
    333
    
    
    
    332Construction in process
    
    
    255
    
    
    
    3013,011
    
    
    
    12,451Less accumulated depreciation
    
    
    4,980
    
    
    
    4,292$
    8,031
    
    
    $
    8,159
 Other Intangible Assets
  GrossCarrying
    
    
    AccumulatedValue
    
    
    Amortization
    
    
    NetMay 4, 2009Proprietary know-how
    
    $
    4,057
    
    
    $
    1,226
    
    
    $
    2,831Trademark
    
    
    5,923
    
    
    
    
    
    
    
    5,923Licensing agreements
    
    
    5,834
    
    
    
    1,250
    
    
    
    4,584Patents
    
    
    1,419
    
    
    
    394
    
    
    
    1,025$
    17,233
    
    
    $
    2,870
    
    
    $
    14,363
 July 31, 2008Proprietary know-how
    
    $
    4,057
    
    
    $
    1,017
    
    
    $
    3,040Trademark
    
    
    5,923
    
    
    
    
    
    
    
    5,923Licensing agreements
    
    
    5,834
    
    
    
    851
    
    
    
    4,983Patents
    
    
    1,315
    
    
    
    324
    
    
    
    991$
    17,129
    
    
    $
    2,192
    
    
    $
    14,937
 8




---



##### Table of Contents



Periods Ending July 31:
    
    AmountFiscal Year 2009 (remaining 3 months)
    
    $
    220Fiscal Year 2010
    
    
    849Fiscal Year 2011
    
    
    626Fiscal Year 2012
    
    
    572Fiscal Year 2013
    
    
    570
  Pledged assets; short and long-term debt (excluding revenue bonds payable)
  Revolving Credit Facility:
  Non-U.S. Receivables Revolving Credit Facility
 Equipment Line of Credit
 9




---



##### Table of Contents



May 4, 2009
    
    
    July 31, 2008Note payable to bank, due in monthly
installments of $41,022 beginning August
2008 plus interest at a rate of 5.0
percent, remaining balance due July 31,
2011, collateralized by substantially all
assets of the Company
    
    $
    1,108
    
    
    $
    1,477Note payable to the estate of the late Dr.
Leonard I. Malis, due in quarterly
installments of $159,904 which includes
interest at an imputed rate of 6.00
percent, remaining balance of $1,758,944,
including contractual interest payments,
due December 2011, collateralized by the
Malis® trademark
    
    
    1,610
    
    
    
    2,006Settlement obligation to Iridex
Corporation, due in annual installments of
$800,000 which includes interest at an
imputed rate of 8.00 percent, remaining
balance of $2,400,000 including the effects
of imputing interest, due April 15, 2012
    
    
    2,062
    
    
    
    2,6494,780
    
    
    
    6,132Less current maturities
    
    
    1,848
    
    
    
    1,823Long-term portion
    
    $
    2,932
    
    
    $
    4,309
 Note 6. Commitments and Contingencies
     10




---



##### Table of Contents



Note 7. Entity Wide Information
  Three Months Ended
    
    
    Nine Months EndedMay 4, 2009
    
    
    April 30, 2008
    
    
    May 4, 2009
    
    
    April 30, 2008Product Line:Ophthalmic
    
    $
    7,476
    
    
    $
    7,293
    
    
    $
    22,326
    
    
    $
    20,521Neurosurgical
    
    
    3,588
    
    
    
    3,368
    
    
    
    10,357
    
    
    
    8,911OEM (Codman, Stryker and Iridex)
    
    
    1,957
    
    
    
    2,612
    
    
    
    6,003
    
    
    
    5,528Other (ENT and Dental)
    
    
    140
    
    
    
    227
    
    
    
    373
    
    
    
    646Total
    
    $
    13,161
    
    
    $
    13,500
    
    
    $
    39,059
    
    
    $
    35,606Region Specific:Domestic
    
    $
    8,636
    
    
    $
    9,724
    
    
    $
    26,578
    
    
    $
    25,679International
    
    
    4,525
    
    
    
    3,776
    
    
    
    12,481
    
    
    
    9,927Total
    
    $
    13,161
    
    
    $
    13,500
    
    
    $
    39,059
    
    
    $
    35,606
  Note 8. Recent Accounting Pronouncements
   11




---



##### Table of Contents



12




---



##### Table of Contents



Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
  The Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities
Exchange Act of 1934, as amended (the Exchange Act), provide a safe harbor for forward-looking
statements made by or on behalf of the Company. The Company and its representatives may from time
to time make written or oral statements that are forward-looking, including statements contained
in this report and other filings with the Securities and Exchange Commission (SEC) and in our
reports to stockholders. In some cases forward-looking statements can be identified by words such
as believe, expect, anticipate, plan, potential, continue or similar expressions. Such
forward-looking statements include risks and uncertainties and there are important factors that
could cause actual results to differ materially from those expressed or implied by such
forward-looking statements. These factors, risks and uncertainties can be found in Part I, Item 1A,
Risk Factors section of the Companys Form 10-K for the fiscal year ended July 31, 2008.
 Although we believe the expectations reflected in our forward-looking statements are based
upon reasonable assumptions, it is not possible to foresee or identify all factors that could have
a material effect on the future financial performance of the Company. The forward-looking
statements in this report are made on the basis of managements assumptions and analyses, as of the
time the statements are made, in light of their experience and perception of historical conditions,
expected future developments and other factors believed to be appropriate under the circumstances.
 In addition, certain market data and other statistical information used throughout this report
are based on independent industry publications. Although we believe these sources to be reliable,
we have not independently verified the information and cannot guarantee the accuracy and
completeness of such sources.
 Except as otherwise required by the federal securities laws, we disclaim any obligation or
undertaking to publicly release any updates or revisions to any forward-looking statement contained
in this quarterly report on Form 10-Q and the information incorporated by reference in this report
to reflect any change in our expectations with regard thereto or any change in events, conditions
or circumstances on which any statement is based.
 Overview
   13




---



##### Table of Contents



® ®
 ® ®
 ®
  Recent Developments
  ®
 14




---



##### Table of Contents



New Product Sales
  Growth in Minimally Invasive Surgery Procedures
  Demand Trends
  Pricing and Volume Trends
 TM
 Results Overview
  15




---



##### Table of Contents



Our Business Strategy
  
    
    continuous improvement and development of our people,
    
    continuous improvement and development of our manufacturing processes,
    
    continuous improvement of our information systems; and
    
    continuous improvement of our research and development initiatives.
    Results of Operations
 Three Month Period Ended May 4, 2009 Compared to Three Month Period Ended April 30, 2008
 Net Sales
  16




---



##### Table of Contents



Quarter Ended
    
    
    % IncreaseMay 4, 2009
    
    
    April 30, 2008
    
    
    (Decrease)Ophthalmic
    
    $
    7,476
    
    
    $
    7,293
    
    
    
    2.5
    %Neurosurgical
    
    
    3,588
    
    
    
    3,368
    
    
    
    6.5
    %OEM (Codman, Stryker and Iridex)
    
    
    1,957
    
    
    
    2,612
    
    
    
    (25.1
    %)Other
    
    
    140
    
    
    
    227
    
    
    
    (38.3
    %)Total
    
    $
    13,161
    
    
    $
    13,500
    
    
    
    (2.5
    %)
     Quarter EndedMay 4, 2009
    
    
    April 30, 2008
    
    
    % IncreaseUnited States (including OEM sales)
    
    $
    8,636
    
    
    $
    9,724
    
    
    
    (11.2
    %)International (including Canada)
    
    
    4,525
    
    
    
    3,776
    
    
    
    19.8
    %Total
    
    $
    13,161
    
    
    $
    13,500
    
    
    
    (2.5
    %)
  Gross Profit
  Operating Expenses
  17




---



##### Table of Contents



Other Expenses
  Operating Income, Income Taxes and Net Income
    Nine Month Period Ended May 4, 2009 Compared to Nine Month Period Ended April 30, 2008
 Net Sales
  Nine Months Ended% IncreaseMay 4, 2009
    
    
    April 30, 2008
    
    
    (Decrease)Ophthalmic
    
    $
    22,326
    
    
    $
    20,521
    
    
    
    8.8
    %Neurosurgical
    
    
    10,357
    
    
    
    8,911
    
    
    
    16.2
    %OEM (Codman, Stryker and Iridex)
    
    
    6,003
    
    
    
    5,528
    
    
    
    8.6
    %Other
    
    
    373
    
    
    
    646
    
    
    
    (42.3
    %)Total
    
    $
    39,059
    
    
    $
    35,606
    
    
    
    9.7
    %
 18




---



##### Table of Contents



Nine Months EndedMay 4, 2009
    
    
    April 30, 2008
    
    
    % IncreaseUnited States (including OEM sales)
    
    $
    26,578
    
    
    $
    25,679
    
    
    
    3.5
    %International (including Canada)
    
    
    12,481
    
    
    
    9,927
    
    
    
    25.7
    %Total
    
    $
    39,059
    
    
    $
    35,606
    
    
    
    9.7.
    %
  Gross Profit
  Operating Expenses
   19




---



##### Table of Contents



Other Expenses
  Operating Income, Income Taxes and Net Income
    Liquidity and Capital Resources
     20




---



##### Table of Contents



Revolving Credit Facility:
  Non-U.S. Receivables Revolving Credit Facility
 Equipment Line of Credit
  Critical Accounting Policies
  
 Item 3  Quantitative and Qualitative Disclosures about Market Risk
  21




---



##### Table of Contents



Item 4  Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  
 Part II  Other Information
 
 Item 1  Legal Proceedings
  22




---



##### Table of Contents



® ® ®
 ® ® ®
  
 Item 1A  Risk Factors
  
 Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3  Defaults Upon Senior Securities
  23




---



##### Table of Contents



Item 4  Submission of Matters to a Vote of Security Holders
  
 Item 5  Other Information
  
 Item 6  Exhibits
 Exhibit No.
    
    Description31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 Trademark Acknowledgements
  24




---



##### Table of Contents



SYNERGETICS USA, INC.
(Registrant)June 15, 2009

/s/ David M. HableChief Executive OfficerJune 15, 2009
    /s/ Pamela G. BoonePamela G. Boone, Executive VicePresident, Chief Financial Officer, Secretary
and Treasurer (Principal Financial and
Principal Accounting Officer) 25