Staar Surgical Earnings 2019-06-28

STAA 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

staa-10q_20190628.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 28, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-11634

STAAR SURGICAL COMPANY

(Exact Name of Registrant as Specified in its Charter)

Delaware	95-3797439
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
25651 Atlantic Ocean Drive Lake Forest, California	92630
(Address of Principal Executive Offices)	(Zip Code)

(626) 303-7902

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common	STAA	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The registrant has 44,542,965 shares of common stock, par value $0.01 per share, issued and outstanding as of July 26, 2019.

STAAR SURGICAL COMPANY

INDEX

		PAGE NUMBER

PART I – FINANCIAL INFORMATION		1

ITEM 1	FINANCIAL STATEMENTS	1

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	19

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	25

ITEM 4.	CONTROLS AND PROCEDURES	25

PART II – OTHER INFORMATION		25

ITEM 1.	LEGAL PROCEEDINGS	25

ITEM 1A.	RISK FACTORS	25

ITEM 4.	MINE SAFETY DISCLOSURES	26

ITEM 5.	OTHER INFORMATION	26

ITEM 6.	EXHIBITS	26

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)

(Unaudited)

	June 28, 2019			December 28, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	103,251		$	103,877
Accounts receivable trade, net of allowance of doubtful accounts of $162 and $550, respectively		32,962			25,946
Inventories, net		16,328			16,704
Prepayments, deposits and other current assets		6,367			5,045
Total current assets		158,908			151,572
Property, plant and equipment, net		13,382			11,451
Finance lease right-of-use assets, net		2,338			—
Operating lease right-of-use assets, net		7,219			—
Intangible assets, net		261			243
Goodwill		1,786			1,786
Deferred income taxes		1,355			1,278
Other assets		713			1,009
Total assets	$	185,962		$	167,339
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	2,854		$	3,780
Accounts payable		8,097			6,524
Obligations under finance leases		960			1,098
Obligations under operating leases		2,766			—
Allowance for sales returns		3,263			2,895
Other current liabilities		10,771			13,431
Total current liabilities		28,711			27,728
Obligations under finance leases		580			459
Obligations under operating leases		4,580			—
Deferred income taxes		1,406			1,022
Asset retirement obligations		212			206
Deferred rent		—			188
Pension liability		6,138			5,310
Total liabilities		41,627			34,913
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value; 60,000 shares authorized: 44,534 and 44,195 shares issued and outstanding at June 28, 2019 and December 28, 2018, respectively		445			442
Additional paid-in capital		296,063			289,584
Accumulated other comprehensive loss		(1,602	)		(1,320	)
Accumulated deficit		(150,571	)		(156,280	)
Total stockholders’ equity		144,335			132,426
Total liabilities and stockholders’ equity	$	185,962		$	167,339

See accompanying notes to the condensed consolidated financial statements.

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended					Six Months Ended
	June 28, 2019		June 29, 2018			June 28, 2019			June 29, 2018
Net sales	$	39,664	$	33,905		$	72,247		$	60,998
Cost of sales		9,765		8,678			18,168			16,340
Gross profit		29,899		25,227			54,079			44,658
Selling, general and administrative expenses:
General and administrative		7,508		6,196			14,345			11,967
Marketing and selling		11,682		10,659			21,825			18,113
Research and development		6,098		5,346			11,733			10,753
Total selling, general and administrative expenses		25,288		22,201			47,903			40,833
Operating income		4,611		3,026			6,176			3,825
Other income (expense), net:
Interest income (expense), net		259		(24	)		530			(36	)
Gain (loss) on foreign currency transactions		11		(520	)		(237	)		(597	)
Royalty income		163		149			334			306
Other income, net		1		4			98			21
Total other income (expense), net		434		(391	)		725			(306	)
Income before income taxes		5,045		2,635			6,901			3,519
Provision for income taxes		1,131		805			1,620			1,106
Net income	$	3,914	$	1,830		$	5,281		$	2,413
Net income per share:
Basic	$	0.09	$	0.04		$	0.12		$	0.06
Diluted	$	0.08	$	0.04		$	0.11		$	0.06
Weighted average shares outstanding:
Basic		44,479		41,723			44,357			41,568
Diluted		46,733		43,999			46,842			43,654

See accompanying notes to the condensed consolidated financial statements.

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 28, 2019			June 29, 2018			June 28, 2019			June 29, 2018
Net income	$	3,914		$	1,830		$	5,281		$	2,413
Other comprehensive income (loss):
Defined benefit plans:
Net change in plan assets		(614	)		(21	)		(640	)		(30	)
Reclassification into other income, net		28			26			54			51
Foreign currency translation gain (loss)		382			(521	)		339			207
Tax effect		(55	)		156			(35	)		(67	)
Other comprehensive income (loss), net of tax		(259	)		(360	)		(282	)		161
Comprehensive income	$	3,655		$	1,470		$	4,999		$	2,574

See accompanying notes to the condensed consolidated financial statements.

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

	Three Months Ended
	Common Stock Shares		Common Stock Par Value		Additional Paid-In Capital		Accumulated Other Compre- hensive Income (Loss)			Accumulated Deficit			Total
Balance, at March 29, 2019		44,447	$	444	$	292,722	$	(1,343	)	$	(154,485	)	$	137,338
Net income		—		—		—		—			3,914			3,914
Other comprehensive loss		—		—		—		(259	)		—			(259	)
Common stock issued upon exercise of options		52		1		486		—			—			487
Stock-based compensation		—		—		2,855		—			—			2,855
Unvested restricted stock		11		—		—		—			—			—
Vested restricted stock		24		—		—		—			—			—
Balance, at June 28, 2019		44,534	$	445	$	296,063	$	(1,602	)	$	(150,571	)	$	144,335
Balance, at March 30, 2018		41,592	$	416	$	206,795	$	(629	)	$	(160,665	)	$	45,917
Net income		—		—		—		—			1,830			1,830
Other comprehensive loss		—		—		—		(360	)		—			(360	)
Common stock issued upon exercise of options		249		2		1,950		—			—			1,952
Stock-based compensation		—		—		1,743	.				—			1,743
Unvested restricted stock		11		—		—		—			—			—
Vested restricted stock		25		1		—		—			—			1
Balance, at June 29, 2018		41,877	$	419	$	210,488	$	(989	)	$	(158,835	)	$	51,083

See accompanying notes to the condensed consolidated financial statements.

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)

(In thousands)

(Unaudited)

	Six Months Ended
	Common Stock Shares		Common Stock Par Value		Additional Paid-In Capital			Accumulated Other Compre- hensive Income (Loss)			Accumulated Deficit			Total
Balance, at December 28, 2018		44,195	$	442	$	289,584		$	(1,320	)	$	(156,280	)	$	132,426
Net income		—		—		—			—			5,281			5,281
Adoption of ASC 842		—		—		—			—			113			113
Adoption of ASU 2018-07		—		—		(315	)		—			315			—
Other comprehensive loss		—		—		—			(282	)		—			(282	)
Common stock issued upon exercise of options		126		1		1,109			—			—			1,110
Stock-based compensation		—		—		5,685			—			—			5,685
Unvested restricted stock		11		—		—			—			—			—
Vested restricted stock		202		2		—			—			—			2
Balance, at June 28, 2019		44,534	$	445	$	296,063		$	(1,602	)	$	(150,571	)	$	144,335
Balance, at December 29, 2017		41,383	$	414	$	204,920		$	(1,150	)	$	(161,248	)	$	42,936
Net income		—		—		—			—			2,413			2,413
Other comprehensive income		—		—		—			161			—			161
Common stock issued upon exercise of options		306		3		2,402			—			—			2,405
Stock-based compensation		—		—		3,166			—			—			3,166
Unvested restricted stock		11		—		—			—			—			—
Vested restricted stock		177		2		—			—			—			2
Balance, at June 29, 2018		41,877	$	419	$	210,488		$	(989	)	$	(158,835	)	$	51,083

See accompanying notes to the condensed consolidated financial statements.

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended
	June 28, 2019		June 29, 2018
Cash flows from operating activities:
Net income	$	5,281	$	2,413
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant, and equipment		1,983		1,168
Amortization of intangibles		17

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$27.26	44	$1,210

10-Q	2019-06-28	Quarter: 2019-06-28
10-Q	2019-03-29	Quarter: 2019-03-29
10-K	2018-12-28	Annual: 2018-12-28
10-Q	2018-09-28	Quarter: 2018-09-28
10-Q	2018-06-29	Quarter: 2018-06-29
10-Q	2018-03-30	Quarter: 2018-03-30
10-K	2017-12-29	Annual: 2017-12-29
10-Q	2017-09-29	Quarter: 2017-09-29
10-Q	2017-06-30	Quarter: 2017-06-30
10-Q	2017-03-31	Quarter: 2017-03-31
10-K	2016-12-30	Annual: 2016-12-30
10-Q	2016-09-30	Quarter: 2016-09-30
10-Q	2016-07-01	Quarter: 2016-07-01
10-Q	2016-04-01	Quarter: 2016-04-01
10-K	2016-01-01	Annual: 2016-01-01
10-Q	2015-10-02	Quarter: 2015-10-02
10-Q	2015-07-03	Quarter: 2015-07-03
10-Q	2015-04-03	Quarter: 2015-04-03
10-K	2015-01-02	Annual: 2015-01-02
10-Q	2014-10-03	Quarter: 2014-10-03
10-Q	2014-07-04	Quarter: 2014-07-04
10-Q	2014-04-04	Quarter: 2014-04-04
10-K	2014-01-03	Annual: 2014-01-03

8-K	2019-08-07	Regulation FD, Exhibits
8-K	2019-07-31	Regulation FD, Exhibits
8-K	2019-07-31	Earnings, Regulation FD, Exhibits
8-K	2019-06-20	Shareholder Vote
8-K	2019-06-05	Regulation FD, Exhibits
8-K	2019-05-15	Regulation FD, Exhibits
8-K	2019-05-02	Regulation FD
8-K	2019-05-01	Regulation FD, Exhibits
8-K	2019-05-01	Regulation FD, Exhibits
8-K	2019-02-21	Regulation FD, Exhibits
8-K	2019-02-21	Regulation FD, Exhibits
8-K	2019-01-17	Regulation FD, Exhibits
8-K	2019-01-07	Earnings, Exhibits
8-K	2019-01-07	Regulation FD, Exhibits
8-K	2018-11-06	Regulation FD, Exhibits
8-K	2018-10-31	Regulation FD, Exhibits
8-K	2018-10-31	Regulation FD, Exhibits
8-K	2018-09-13	Regulation FD, Exhibits
8-K	2018-08-22	Regulation FD, Exhibits
8-K	2018-08-08	Regulation FD, Exhibits
8-K	2018-08-07	Enter Agreement, Other Events, Exhibits
8-K	2018-08-01	Regulation FD, Exhibits
8-K	2018-08-01	Regulation FD, Exhibits
8-K	2018-06-20	Regulation FD, Exhibits
8-K	2018-06-14	Shareholder Vote
8-K	2018-05-02	Regulation FD, Exhibits
8-K	2018-03-13	Regulation FD, Exhibits
8-K	2018-02-28	Regulation FD, Exhibits
8-K	2018-01-08	Regulation FD, Exhibits

TWST	Twist Bioscience	640
PAR	Par Technology	392
CATO	Cato	350
CBNK	Capital Bancorp	159
OGEN	Oragenics	23
SPRS	Surge Components	0
BPI	Bridgepoint Education	0
APTI	Apptio	0
ALES	I-On Communications	0
JCTG	Jiucaitong Group	0

EX-10.37	staa-ex1037_30.htm
EX-31.1	staa-ex311_9.htm
EX-31.2	staa-ex312_6.htm
EX-32.1	staa-ex321_8.htm