Company Quick10K Filing
Quick10K
Staar Surgical
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$27.26 44 $1,210
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 2019-06-05 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
FB Facebook 538,500
MED Medifast 1,700
BGG Briggs & Stratton 492
TCFC Community Financial 169
PCYG Park City Group 143
ATLC Atlanticus 52
SCOO School Specialty 0
LTDH Living 3D Holdings 0
PTRC Petro River Oil 0
AOIX American Oil & Gas 0
STAA 2019-03-29
Part I - Financial Information
Item 1. Financial Statements
Note 1 - Basis of Presentation and Significant Accounting Policies
Note 2 - Inventories
Note 3 - Prepayments, Deposits, and Other Current Assets
Note 4 - Property, Plant and Equipment
Note 5 -Intangible Assets
Note 6 - Other Current Liabilities
Note 7 - Lines of Credit
Note 8 - Leases
Note 9 - Income Taxes
Note 10 - Defined Benefit Pension Plans
Note 11 - Stockholders' Equity
Note 12 - Commitments and Contingencies
Note 13 - Basic and Diluted Net Income per Share
Note 14 - Disaggregation of Revenues, Geographic Sales and Product Sales
Note 15 - Reclassifications
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.36 staa-ex1036_41.htm
EX-31.1 staa-ex311_8.htm
EX-31.2 staa-ex312_6.htm
EX-32.1 staa-ex321_7.htm

Staar Surgical Earnings 2019-03-29

STAA 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 staa-10q_20190329.htm 10-Q staa-10q_20190329.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:    March 29, 2019

Or

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 44,472,846 shares of common stock, par value $0.01 per share, issued and outstanding as of April 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

 

18

 

 

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

23

 

 

 

 

ITEM 4.

CONTROLS AND PROCEDURES

 

23

 

 

 

 

PART II – OTHER INFORMATION

 

23

 

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

 

23

 

 

 

 

ITEM 1A.

RISK FACTORS

 

23

 

 

 

 

ITEM 4.

MINE SAFETY DISCLOSURES

 

24

 

 

 

 

ITEM 5.

OTHER INFORMATION

 

24

 

 

 

 

ITEM 6.

EXHIBITS

 

24

 

 

 


PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)

(Unaudited)

 

 

 

March 29, 2019

 

 

December 28,

2018

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

102,111

 

 

$

103,877

 

Accounts receivable trade, net of allowance of doubtful accounts of

   $437 and $550, respectively

 

 

26,601

 

 

 

25,946

 

Inventories, net

 

 

16,439

 

 

 

16,704

 

Prepayments, deposits and other current assets

 

 

7,534

 

 

 

5,045

 

Total current assets

 

 

152,685

 

 

 

151,572

 

Property, plant and equipment, net

 

 

11,300

 

 

 

11,451

 

Finance lease right-of-use assets, net

 

 

2,445

 

 

 

 

Operating lease right-of-use assets, net

 

 

6,629

 

 

 

 

Intangible assets, net

 

 

263

 

 

 

243

 

Goodwill

 

 

1,786

 

 

 

1,786

 

Deferred income taxes

 

 

1,275

 

 

 

1,278

 

Other assets

 

 

836

 

 

 

1,009

 

Total assets

 

$

177,219

 

 

$

167,339

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Line of credit

 

$

3,272

 

 

$

3,780

 

Accounts payable

 

 

7,018

 

 

 

6,524

 

Obligations under finance leases

 

 

1,158

 

 

 

1,098

 

Obligations under operating leases

 

 

2,495

 

 

 

 

Allowance for sales returns

 

 

2,971

 

 

 

2,895

 

Other current liabilities

 

 

11,317

 

 

 

13,431

 

Total current liabilities

 

 

28,231

 

 

 

27,728

 

Obligations under finance leases

 

 

656

 

 

 

459

 

Obligations under operating leases

 

 

4,270

 

 

 

 

Deferred income taxes

 

 

1,100

 

 

 

1,022

 

Asset retirement obligations

 

 

206

 

 

 

206

 

Deferred rent

 

 

 

 

 

188

 

Pension liability

 

 

5,418

 

 

 

5,310

 

Total liabilities

 

 

39,881

 

 

 

34,913

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value; 60,000 shares authorized: 44,447 and

   44,195 shares issued and outstanding at March 29, 2019 and

   December 28, 2018, respectively

 

 

444

 

 

 

442

 

Additional paid-in capital

 

 

292,722

 

 

 

289,584

 

Accumulated other comprehensive loss

 

 

(1,343

)

 

 

(1,320

)

Accumulated deficit

 

 

(154,485

)

 

 

(156,280

)

Total stockholders’ equity

 

 

137,338

 

 

 

132,426

 

Total liabilities and stockholders’ equity

 

$

177,219

 

 

$

167,339

 

 

See accompanying notes to the condensed consolidated financial statements.

 

1


STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 29,

2019

 

 

March 30,

2018

 

Net sales

 

$

32,583

 

 

$

27,093

 

Cost of sales

 

 

8,403

 

 

 

7,662

 

Gross profit

 

 

24,180

 

 

 

19,431

 

Selling, general and administrative expenses:

 

 

 

 

 

 

 

 

General and administrative

 

 

6,837

 

 

 

5,771

 

Marketing and selling

 

 

10,143

 

 

 

7,454

 

Research and development

 

 

5,635

 

 

 

5,407

 

Total selling, general and administrative expenses

 

 

22,615

 

 

 

18,632

 

Operating income

 

 

1,565

 

 

 

799

 

Other income (expense), net:

 

 

 

 

 

 

 

 

Interest income (expense), net

 

 

271

 

 

 

(12

)

Loss on foreign currency transactions

 

 

(248

)

 

 

(77

)

Royalty income

 

 

171

 

 

 

157

 

Other income, net

 

 

97

 

 

 

17

 

Total other income, net

 

 

291

 

 

 

85

 

Income before income taxes

 

 

1,856

 

 

 

884

 

Provision for income taxes

 

 

489

 

 

 

301

 

Net income

 

$

1,367

 

 

$

583

 

Net income per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.03

 

 

$

0.01

 

Diluted

 

$

0.03

 

 

$

0.01

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

44,235

 

 

 

41,410

 

Diluted

 

 

46,913

 

 

 

43,087

 

 

See accompanying notes to the condensed consolidated financial statements.

2


STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 29,

2019

 

 

March 30,

2018

 

Net income

 

$

1,367

 

 

$

583

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Defined benefit plans:

 

 

 

 

 

 

 

 

Net change in plan assets

 

 

(26

)

 

 

(9

)

Reclassification into other income, net

 

 

26

 

 

 

25

 

Foreign currency translation gain (loss)

 

 

(43

)

 

 

728

 

Tax effect

 

 

20

 

 

 

(223

)

Other comprehensive income (loss), net of tax

 

 

(23

)

 

 

521

 

Comprehensive income

 

$

1,344

 

 

$

1,104

 

 

See accompanying notes to the condensed consolidated financial statements.

 

3


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 December 28, 2018

 

 

44,195

 

 

$

442

 

 

$

289,584

 

 

$

(1,320

)

 

$

(156,280

)

 

$

132,426

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,367

 

 

 

1,367

 

Adoption of ASC 842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

113

 

 

 

113

 

Adoption of ASU 2018-07

 

 

 

 

 

 

 

 

(315

)

 

 

 

 

 

315

 

 

 

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

 

 

 

(23

)

Common stock issued upon exercise of options

 

 

74

 

 

 

 

 

 

623

 

 

 

 

 

 

 

 

 

623

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,830

 

 

 

 

 

 

 

 

 

2,830

 

Vested restricted stock

 

 

178

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

2

 

Balance, at March 29, 2019

 

 

44,447

 

 

$

444

 

 

$

292,722

 

 

$

(1,343

)

 

$

(154,485

)

 

$

137,338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, at December 29, 2017

 

 

41,383

 

 

$

414

 

 

$

204,920

 

 

$

(1,150

)

 

$

(161,248

)

 

$

42,936

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

583

 

 

 

583

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

521

 

 

 

 

 

 

521

 

Common stock issued upon exercise of options

 

 

57

 

 

 

1

 

 

 

452

 

 

 

 

 

 

 

 

 

453

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,423

 

 

 

 

 

 

 

 

 

1,423

 

Vested restricted stock

 

 

152

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Balance, at March 30, 2018

 

 

41,592

 

 

$

416

 

 

$

206,795

 

 

$

(629

)

 

$

(160,665

)

 

$

45,917

 

 

 

See accompanying notes to the condensed consolidated financial statements.

 

4


STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 29,

2019

 

 

March 30,

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

1,367

 

 

$

583

 

Adjustments to reconcile net income to net cash provided by

   operating activities:

 

 

 

 

 

 

 

 

Depreciation of property, plant, and equipment

 

 

1,222

 

 

 

549

 

Amortization of intangibles

 

 

8

 

 

 

9

 

Deferred income taxes

 

 

79

 

 

 

92

 

Change in net pension liability

 

 

119

 

 

 

87

 

Loss on disposal of property and equipment

 

 

 

 

 

6

 

Stock-based compensation expense

 

 

2,641

 

 

 

1,301

 

Provision for sales returns and bad debts

 

 

(34

)

 

 

514

 

Inventory provision

 

 

455

 

 

 

506

 

Changes in working capital:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(554

)

 

 

(2,755

)

Inventories

 

 

(7

)

 

 

(396

)

Prepayments, deposits, and other current assets

 

 

(2,317

)

 

 

(730

)

Accounts payable

 

 

(185

)

 

 

2,038

 

Other current liabilities

 

 

(2,063

)

 

 

726

 

Net cash provided by operating activities

 

 

731

 

 

 

2,530

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisition of property and equipment

 

 

(2,203

)

 

 

(965

)

Acquisition of patents and licenses

 

 

(30

)

 

 

 

Net cash used in investing activities

 

 

(2,233

)

 

 

(965

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Repayment of finance lease obligations

 

 

(365

)

 

 

(380

)

Repayment on line of credit

 

 

(499

)

 

 

 

Proceeds from the exercise of stock options

 

 

622

 

 

 

453

 

Proceeds from vested restricted stock

 

 

2

 

 

 

1

 

Net cash provided by (used in) financing activities

 

 

(240

)

 

 

74

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(24

)

 

 

612

 

Increase (decrease) in cash, cash equivalents and restricted cash

 

 

(1,766

)

 

 

2,251

 

Cash, cash equivalents and restricted cash, at beginning of year

 

 

103,999

 

 

 

18,641

 

Cash, cash equivalents and restricted cash, at end of year

 

$

102,233

 

 

$

20,892

 

 

See accompanying notes to the condensed consolidated financial statements.

 

5


STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

 

Note 1 — Basis of Presentation and Significant Accounting Policies

The Condensed Consolidated Financial Statements of the Company present the financial position, results of operations, and cash flows of STAAR Surgical Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Commission. In accordance with those rules and regulations certain information and footnote disclosures normally included in Comprehensive Financial Statements have been condensed or omitted pursuant to such rules and regulations. The Consolidated Balance Sheet as of December 28, 2018 was derived from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 28, 2018.

The Condensed Consolidated Financial Statements for the three months ended March 29, 2019 and March 30, 2018, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition and results of operations. The results of operations for the three months ended March 29, 2019 and March 30, 2018, are not necessarily indicative of the results to be expected for any other interim period or for the entire year.  

Each of the Company’s fiscal reporting periods ends on the Friday nearest to the quarter ending date and generally consists of 13 weeks.  Unless the context indicates otherwise “we,” “us,” the “Company,” and “STAAR” refer to STAAR Surgical Company and its consolidated subsidiaries.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows (in 000’s):

 

 

 

March 29, 2019

 

 

December 28,

2018

 

 

March 30,

2018

 

Cash and cash equivalents

 

$

102,111

 

 

$

103,877

 

 

$

20,771

 

Restricted cash(1)

 

 

122

 

 

 

122

 

 

 

121

 

Total cash, cash equivalents and restricted cash

 

$

102,233

 

 

$

103,999

 

 

$

20,892

 

 

(1)

Included in other assets on the Condensed Consolidated Balance Sheets.

The Company has restricted cash set aside as collateral for a standby letter of credit required by the California Department of Public Health for unforeseen future regulatory costs related to the decommissioning of certain manufacturing equipment.

Lease Accounting

On December 29, 2018 (beginning of fiscal year 2019), the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” and its subsequent amendments affecting the Company: (i) ASU 2018-10, “Codification Improvements to Topic 842, Leases,” and (ii) ASU 2018-11, “Leases (Topic 842):  Targeted improvements,” using the modified retrospective method.  Upon adoption of ASU 2016-02, the Company recognized a cumulative adjustment of $113,000 which decreased the accumulated deficit and recognized right-of-use (“ROU”) assets and lease liabilities for operating leases, whereby the Company’s accounting finance leases remained substantially unchanged.

The Company recognizes ROU assets and lease liabilities for leases with terms greater than twelve months in the Condensed Consolidated Balance Sheets.  Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.  

6


STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

 

Note 1 — Basis of Presentation and Significant Accounting Policies (Continued)

Lease Accounting (Continued)

A contract contains a lease if the contract conveys the right to control an identified asset for a period of time in exchange for consideration.  An asset is either explicitly identified or implicitly identified and must be physically distinct.  In addition, the Company must have both the right to obtain substantially all of the economic benefits from use of the identified asset and has the right to direct the use of the identified asset.

Certain leases may have non-lease components such as common area maintenance expense for building leases and maintenance expenses for automobile leases.  In general, the Company separates common area maintenance expense component from the value of the ROU asset and lease liability when evaluating rental properties under ASU 2016-02, whereas, the Company includes the maintenance and service components in the value of the ROU asset and lease liability while evaluating automobile leases under ASU 2016-02.

When determining whether a lease is a finance lease or an operating lease, ASU 2016-02 does not specifically define criteria to determine “major part of remaining economic life of the underlying asset” and “substantially all of the fair value of the underlying asset.” For lease classification determination, the Company continues to use (i) greater to or equal to 75% to determine whether the lease term is a major part of the remaining economic life of the underlying asset and (ii) greater to or equal to 90% to determine whether the present value of the sum of lease payments is substantially of the fair value of the underlying asset.

The Company uses either the rate implicit in the lease or its incremental borrowing rate as the discount rate in lease accounting.

When adopting ASU 2016-02, the Company did not reassess any expired or existing contracts, reassess the lease classification for any expired or existing leases and reassess initial direct costs for exiting leases.  The Company also elected not to capitalize leases that have terms of twelve months or less.

The Company reviews ROU assets, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. The Company measures recoverability of these assets by comparing the carrying value of such assets to the estimated undiscounted future cash flows the assets are expected to generate. When the estimated undiscounted future cash flows are less than their carrying amount, an impairment loss is recognized equal to the difference between the assets’ fair value and their carrying value.

Recently Adopted Accounting Pronouncements and Recent Accounting Pronouncements Not Yet Adopted

On December 29, 2018 (beginning of fiscal year 2019), the Company adopted ASU 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220):  Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” provides an option to reclassify stranded tax effects within Accumulated Other Comprehensive Income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recorded.  The adoption of ASU 2018‑02 did not have material impact on the Condensed Consolidated Financial Statements.

On December 29, 2018 (beginning of fiscal year 2019), the Company adopted ASU 2018-07, “Compensation-Stock Compensation (Topic 718):  Improvements to Nonemployee Share-Based Payment Accounting,” aligns the accounting for share-based payments to nonemployees similar to employees.  Upon the adoption of ASU 2018-07, the Company recognized a cumulative adjustment of $315,000 which decreased the accumulated deficit.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820):  Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which modifies certain disclosures requirements for reporting fair value measurements.  This is effective for fiscal years ending after December 15, 2019.  Early adoption is permitted.  The Company will adopt this standard as of January 4, 2020 (beginning of fiscal year 2020) and is currently evaluating the disclosure requirements and its effect on the Condensed Consolidated Financial Statements.

7


STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

 

Note 1 — Basis of Presentation and Significant Accounting Policies (Continued)

Recently Adopted Accounting Pronouncements and Recent Accounting Pronouncements Not Yet Adopted (Continued)

In August 2018, the FASB issued ASU 2018-14, “Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20); Disclosure Framework – Changes in the Disclosure Requirement for Defined Benefit Plans,” which modifies disclosure requirements for employers that sponsor defined benefit pension or other post retirement plans.  This is effective for fiscal years ending after December 15, 2020.  Early adoption is permitted.  The Company will adopt this standard as of January 2, 2021 (beginning of fiscal year 2021) and is currently evaluating the disclosure requirements and its effect on the Condensed Consolidated Financial Statements.

Note 2 — Inventories

Inventories, net are stated at the lower of cost and net realizable value, determined on a first-in, first-out basis and consisted of the following (in thousands):

 

 

 

March 29, 2019

 

 

December 28,

2018

 

Raw materials and purchased parts

 

$

3,081

 

 

$

2,678

 

Work in process

 

 

2,144

 

 

 

2,195

 

Finished goods

 

 

12,592

 

 

 

13,214

 

Total inventories, gross

 

 

17,817

 

 

 

18,087

 

Less inventory reserves

 

 

1,378

 

 

 

1,383

 

Total inventories, net

 

$

16,439

 

 

$

16,704

 

 

Note 3 — Prepayments, Deposits, and Other Current Assets

Prepayments, deposits, and other current assets consisted of the following (in thousands):

 

 

 

March 29, 2019

 

 

December 28,

2018

 

Prepayments and deposits

 

$

2,716

 

 

$

1,707

 

Prepaid insurance

 

 

1,268

 

 

 

1,271

 

Consumption tax receivable

 

 

1,007

 

 

 

912

 

Value added tax (VAT) receivable

 

 

1,089

 

 

 

565

 

Income tax receivable

 

 

319

 

 

 

285

 

BVG Prepayment

 

 

543

 

 

 

16

 

Other(1)

 

 

592

 

 

 

289

 

Total prepayments, deposits and other current assets

 

$

7,534

 

 

$

5,045

 

 

(1)

No individual item in “other current assets” exceeds 5% of the total prepayments, deposits and other current assets.

Note 4 — Property, Plant and Equipment

Property, plant and equipment, net consisted of the following (in thousands):

 

 

 

March 29, 2019

 

 

December 28,

2018

 

Machinery and equipment

 

$

19,127

 

 

$

19,000

 

Furniture and fixtures

 

 

9,328

 

 

 

9,860

 

Leasehold improvements

 

 

10,030

 

 

 

10,045

 

Total property, plant and equipment, gross

 

 

38,485

 

 

 

38,905

 

Less accumulated depreciation

 

 

27,185

 

 

 

27,454

 

Total property, plant and equipment, net

 

$

11,300

 

 

$

11,451

 

 

8


STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

 

Note 5 –Intangible Assets

 

Intangible assets, net consisted of the following (in thousands):

 

 

 

March 29, 2019

 

 

December 28,

2018

 

Long-lived amortized intangible assets

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

 

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

 

Patents and licenses

 

$

9,284

 

 

$

(9,021

)

 

$

263

 

 

$

9,257

 

 

$

(9,014

)

 

$

243

 

 

Note 6 – Other Current Liabilities

Other current liabilities consisted of the following (in thousands):

 

 

 

March 29, 2019

 

 

December 28,

2018

 

Accrued salaries and wages

 

$

5,397

 

 

$

3,172

 

Accrued insurance

 

 

666

 

 

 

1,061

 

Accrued consumption tax

 

 

1,155

 

 

 

995

 

Accrued bonuses

 

 

944

 

 

 

5,113

 

Income taxes payable

 

 

1,183

 

 

 

1,105

 

Other(1)

 

 

1,972

 

 

 

1,985

 

Total other current liabilities

 

$

11,317

 

 

$

13,431

 

 

(1)

No individual item in “Other” exceeds 5% of the other current liabilities.

Note 7 – Lines of Credit

Since 1998, the Company’s wholly owned Japanese subsidiary, STAAR Japan, has had an agreement with Mizuho Bank which provides for borrowings of up to 500,000,000 Yen, at an interest rate equal to the uncollateralized overnight call rate (approximately 0.06% as of March 29, 2019) plus a 0.50% spread, and may be renewed quarterly (the current line expires on May 21, 2019).  The credit facility is not collateralized.  The Company had 362,500,000 Yen and 417,500,000 Yen outstanding on the line of credit as of March 29, 2019 and December 28, 2018, respectively (approximately $3,272,000 and 3,780,000 based on the foreign exchange rates on March 29, 2019 and December 28, 2018, respectively), which approximates fair value due to the short-term maturity and market interest rates of the line of credit.  In case of default, the interest rate will be increased to 14% per annum.  There was 137,500,000 Yen and 82,500,000 Yen available for borrowing as of March 29, 2019 and December 28, 2018, respectively (approximately $1,241,000 and $747,000 based on the foreign exchange rate on March 29, 2019 and December 28, 2018, respectively).  At maturity on May 21, 2019, the Company expects to renew this line of credit for an additional three months, with similar terms.

In September 2013, the Company’s wholly owned Swiss subsidiary, STAAR Surgical AG, entered into a framework agreement for loans (“framework agreement”) with Credit Suisse (the “Bank”). The framework agreement provides for borrowings of up to 1,000,000 CHF (Swiss Francs) (approximately $1,000,000 at the rate of exchange on March 29, 2019 and December 28, 2018), to be used for working capital purposes. Accrued interest and 0.25% commissions on average outstanding borrowings is payable quarterly and the interest rate will be determined by the Bank based on the then prevailing market conditions at the time of borrowing. The framework agreement is automatically renewed on an annual basis based on the same terms assuming there is no default. The framework agreement may be terminated by either party at any time in accordance with its general terms and conditions. The framework agreement is not collateralized and contains certain conditions such as providing the Bank with audited financial statements annually and notice of significant events or conditions, as defined in the framework agreement. The Bank may also declare all amounts outstanding to be immediately due and payable upon a change of control or a “material qualification” in STAAR Surgical independent auditors’ report, as defined. There were no borrowings outstanding as of March 29, 2019 and December 28, 2018.

The Company is in compliance with covenants of its credit facilities and lines of credit as of March 29, 2019.

During the three months ended March 29, 2019, the Company converted the lease line of credit schedule 011 with Farnam Street Financial, Inc. into a finance lease liability of approximately $500,000.

9


STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

 

Note 8Leases

Finance Leases

The Company entered into finance leases primarily related to purchases of equipment used for manufacturing or computer-related equipment.  These finance leases are two to five years in length and have fixed payment amounts for the term of the contract and have options to purchase the assets at the end of the lease term.  Supplemental balance sheet information related to finance leases was as follows (dollars in thousands):

 

 

 

March 29, 2019

 

Machinery and equipment

 

$

2,121

 

Furniture and fixtures

 

 

1,123

 

Leasehold improvements

 

 

27

 

Finance lease right-of-use assets, gross

 

 

3,271

 

Less accumulated depreciation

 

 

826

 

Finance lease right-of-use assets, net

 

$

2,445

 

 

 

 

 

 

Total finance lease liability

 

$

1,814

 

Weighted-average remaining lease term (in years)

 

 

1.5

 

Weighted-average discount rate

 

 

6.63

%

 

Supplemental cash flow information related to finance leases was as follows (dollars in thousands):

 

 

 

Three Months Ended

 

 

 

March 29,

2019

 

Amortization of finance lease right-of-use asset

 

$

161

 

Interest on finance lease liabilities

 

 

19

 

Cash paid for amounts included in the measurement of finance lease liabilities:

 

 

 

 

Operating cash flows

 

 

19

 

Financing cash flows

 

 

365

 

Right-of-use assets obtained in exchange for new finance lease liabilities

 

 

642

 

Operating Leases

The Company entered into operating leases primarily related to real property (office, manufacturing and warehouse facilities), automobiles and copiers.  These operating leases are two to five years in length with options to extend.  The Company did not include any lease extensions in the initial valuation unless the Company was reasonably certain to extend the lease.  Depending on the lease, there are those with fixed payment amounts for the entire length of the contract or payments which increase periodically as noted in the contract or increased at an inflation rate indicator.  For operating leases that increase using an inflation rate indicator, the Company used the inflation rate at the time the lease was entered into for the length of the lease term. Supplemental balance sheet information related to operating leases was as follows (dollars in thousands):

10


STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

 

Note 8 – Leases (Continued)

Operating Leases (Continued)

 

 

March 29, 2019

 

Machinery and equipment

$

734

 

Furniture and fixtures

 

462

 

Real property

 

9,370

 

Operating lease right-of-use assets, gross

 

10,566

 

Less accumulated depreciation

 

3,937

 

Operating lease right-of-use assets, net

$

6,629

 

 

 

 

 

Total operating lease liability

$

6,765

 

Weighted-average remaining lease term (in years)

 

2.5

 

Weighted-average discount rate

 

1.83

%

 

Supplemental cash flow information related to operating leases was as follows (dollars in thousands):

 

 

 

Three Months Ended

 

 

 

March 29,

2019

 

Operating lease cost

 

$

611

 

Cash paid for amounts included in the measurement of operating lease liabilities:

 

 

 

 

Operating cash flows

 

 

601

 

Right-of-use assets obtained in exchange for new operating lease liabilities

 

 

1,464

 

Future Minimum Lease Commitments

Estimated future minimum lease payments under operating and finance leases having initial or remaining non-cancelable lease terms more than one year as of March 29, 2019 and December 28, 2018 are as follows (in thousands):

 

As of March 29, 2019

12 Months Ended

 

Operating Leases

 

 

Finance Leases

 

March 2020

 

$

2,663

 

 

$

1,221

 

March 2021

 

 

2,237

 

 

 

572

 

March 2022

 

 

1,042

 

 

 

110

 

March 2023

 

 

779

 

 

 

 

March 2024

 

 

349

 

 

 

 

Thereafter

 

 

7

 

 

 

 

Total minimum lease payments, including interest

 

$

7,077

 

 

$

1,903

 

Less amounts representing interest

 

 

312

 

 

 

89

 

Total minimum lease payments

 

$

6,765

 

 

$

1,814

 

 

As of December 28, 2018

12 Months Ended

 

Operating Leases

 

 

Finance Leases

 

December 2019

 

$

2,606

 

 

$

1,153

 

December 2020

 

 

2,202

 

 

 

332

 

December 2021

 

 

980

 

 

 

143

 

December 2022

 

 

507

 

 

 

4

 

December 2023

 

 

202

 

 

 

 

Thereafter

 

 

12

 

 

 

 

Total minimum lease payments, including interest

 

 

6,509

 

 

 

1,632

 

Less amounts representing interest

 

 

 

 

 

75

 

Total minimum lease payments

 

$

6,509

 

 

$

1,557

 

 

11


STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

 

Note 9 Income Taxes

The Company recorded an income tax provision as follows (in thousands):

 

 

 

Three Months Ended

 

 

 

March 29,

2019

 

 

March 30,

2018

 

Provision for income taxes

 

$

489

 

 

$

301

 

The income tax provision is primarily due to pre-tax income generated in certain foreign jurisdictions.  The Company’s quarterly provision for income taxes is determined by estimating an annual effective tax rate.  This estimate may fluctuate throughout the year as new information becomes available affecting its underlying assumptions.  There are no unrecognized tax benefits related to uncertain tax positions taken by the Company.   

All earnings from the Company’s subsidiaries are not considered to be permanently reinvested.  Accordingly, the Company provides withholding and U.S. taxes on all unremitted foreign earnings.

The 2017 Tax Act subjects a U.S. shareholder to tax on Global Intangible Low Tax Income (“GILTI”) earned by certain foreign subsidiaries.  In general, GILTI is the excess of a U.S. shareholder’s total net foreign income over a deemed return on tangible assets.  The provision further allows a deduction of 50 percent of GILTI, however this deduction is limited to the Company’s pre-GILTI U.S. income.  The Company has elected to account for GILTI as a current period expense when incurred.

For the three months ended March 29, 2019, the Company included GILTI of $2,064,000 in U.S. gross income, which was fully offset with net operating loss carryforwards.  The Company was not able to utilize the deduction of 50 percent of GILTI, as this deduction is limited to the Company’s pre-GILTI U.S. tax income.

As of March 29, 2019, the Company established a full valuation allowance in the U.S. for all periods presented due to the significant uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets, with the exception of the refundable alternative minimum tax credit of $273,000. Management will continue to monitor and evaluate all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, impact of GILTI in the U.S., tax-planning strategies, and results of recent operations. In projecting future taxable income, the Company begins with historical results and incorporates assumptions including overall current and projected business and industry conditions, the amount of future federal, state, and foreign pretax operating income, the reversal of temporary differences and the feasible and prudent tax-planning strategies.  These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates the Company uses to manage the underlying businesses.  In evaluating the objective evidence, the Company considers three years of cumulative operating results.  Valuation allowances, or reductions to deferred tax assets, are recognized if, based on the weight of all the available evidence, it is more likely than not that some portion or all the deferred tax asset may not be realized.  As the Company experiences continued growth and profits the need for a valuation allowance will be evaluated each reporting period by Management to determine whether it is more likely than not that the Company’s deferred tax assets will be realizable in a later period. Any such changes in the assessment of a full or partial valuation allowance could have a material impact on earnings. 

 

12


STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

 

Note 10 – Defined Benefit Pension Plans

 

The Company has defined benefit plans covering employees of its Switzerland and Japan operations.  The following table summarizes the components of net periodic pension cost recorded for the Company’s defined benefit pension plans (in thousands):

 

 

 

Three Months Ended

 

 

 

March 29,

2019

 

 

March 30,

2018

 

Service cost(1)

 

$

232

 

 

$

138

 

Interest cost

 

 

20

 

 

 

14

 

Expected return on plan assets

 

 

(33

)

 

 

(26

)

Net amortization of transitional obligation(2)

 

 

 

 

 

3

 

Prior service credit(2)

 

 

(6

)

 

 

(6

)

Actuarial loss recognized in current period(2)

 

 

32

 

 

 

28

 

Net periodic pension cost

 

$

245