
A national law firm launched a probe into executive compensation at Cynosure (NSDQ:CYNO) as the Westford, Mass.-based aesthetic devices maker reported soaring sales growth during its 1st quarter.
The Shareholders Foundation, a portolio management group not related to the legal action, noted an investigation into "whether certain officers and directors of Cynosure Inc. breached their fiduciary duties by paying executives excessive compensation."
Although the law firm announced a probe, Cynosure hasn’t received notice of any action and no suit has been filed, the company told MassDevice.com today.*
The news came as Cynosure closed its 1st quarter, reporting a 56% increase in Q1 sales as it introduced its newly cleared Cellulaze cellulite-targeting aesthetic laser treatment in the U.S.
Cynosure posted $34.2 million in sales in the 3 months ended March 31, compared with $21.9 million during the same period last year.
The company also broke out of the red with profits of $819,000, or 6¢ earned per diluted share. That’s a significant turnaround from the $1.9 million in losses, or 15¢ lost per share, during the same time in 2011.
That blew Wall Street’s expectations out of the water, as analysts had projected that the company would post a loss of 0.007¢ for the quarter.
"Our business is off to a strong start in 2012, and we hope to continue that positive momentum as we move through the year," chairman, president & CEO Michael Davin said in prepared remarks. "Cellulaze is just weeks into its U.S. launch, and the initial response has been excellent."
"Laser revenue in North America was up more than 90%," Davin added. "International laser revenue also performed well with a 53% increase in the 1st quarter of 2012 over the same period in 2011, primarily attributable to our expanded product offerings from acquisitions."
The good news followed announcements that the national law firm of Levi & Korsinsky LLP had early last month launched a probe into compensation provided to certain Cynosure executives. The law firm of Levi & Korsinsky LLP did not immediately return requests for comment.
The Shareholders Foundation picked up on the story, advising CYNO shareholders to take note of the investigation and make themselves aware of their options.
The group noted that Davin received a total of $1.85 million in 2011, even as the company was in the red. He took home 20% more than the $1.54 million he received in 2008, when the company had $10.2 million in earnings.
The Shareholders Foundation also cited CFO Timothy Baker’s pay, which came to $1.1 million in 2011, a 47% boost from 2008.
Both executives had accepted pay cuts in 2009, when Davin took $900,000 and Baker took $580,000.
"The compensation of certain officers in 2011 is higher than 2008 even though the company’s financial performance in 2008 was significantly higher than in 2011," Shareholders Foundation wrote in a press release.
CYNO shares were down 0.7% to $20.52 as of about 12:30 p.m. today.
*Updated May 1, 2012, at 3:15 p.m. with comments from Cynosure and to note that the investigation was initially launched early in April. The Shareholders Foundation issued its note today.