STAAR SURGICAL CO [STAA] Filings

10-Q 1 staa-10q_20220401.htm 10-Q staa-10q_20220401.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: April 1, 2022

☐	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 47,811,264 shares of common stock, par value $0.01 per share, issued and outstanding as of April 29, 2022.

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	14

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	18

ITEM 4.	CONTROLS AND PROCEDURES	18

PART II – OTHER INFORMATION		19

ITEM 1.	LEGAL PROCEEDINGS	19

ITEM 1A.	RISK FACTORS	19

ITEM 4.	MINE SAFETY DISCLOSURES	19

ITEM 5.	OTHER INFORMATION	19

ITEM 6.	EXHIBITS	20

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)

(Unaudited)

	April 1, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	193,067		$	199,706
Accounts receivable trade, net of allowance for credit losses of $77 and $43, respectively		47,074			43,531
Inventories, net		18,450			17,274
Prepayments, deposits and other current assets		15,311			10,900
Total current assets		273,902			271,411
Property, plant and equipment, net		39,645			35,912
Finance lease right-of-use assets, net		461			506
Operating lease right-of-use assets, net		31,030			31,310
Intangible assets, net		203			218
Goodwill		1,786			1,786
Deferred income taxes		3,333			3,813
Other assets		817			822
Total assets	$	351,177		$	345,778
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	13,421		$	8,699
Obligations under finance leases		151			127
Obligations under operating leases		3,608			3,283
Allowance for sales returns		4,566			4,816
Other current liabilities		19,436			31,877
Total current liabilities		41,182			48,802
Obligations under finance leases		338			382
Obligations under operating leases		27,762			28,269
Deferred income taxes		811			811
Asset retirement obligations		186			198
Pension liability		4,581			8,758
Total liabilities		74,860			87,220
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value; 60,000 shares authorized: 47,810 and 47,716 shares issued and outstanding at April 1, 2022 and December 31, 2021, respectively		478			477
Additional paid-in capital		378,690			373,519
Accumulated other comprehensive loss		(1,063	)		(4,048	)
Accumulated deficit		(101,788	)		(111,390	)
Total stockholders’ equity		276,317			258,558
Total liabilities and stockholders’ equity	$	351,177		$	345,778

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
	April 1, 2022			April 2, 2021
Net sales	$	63,200		$	50,752
Cost of sales		13,936			11,610
Gross profit		49,264			39,142
Selling, general and administrative expenses:
General and administrative		11,940			10,212
Selling and marketing		17,270			13,201
Research and development		7,941			8,259
Total selling, general and administrative expenses		37,151			31,672
Operating income		12,113			7,470
Other expense, net:
Interest expense, net		(6	)		(7	)
Loss on foreign currency transactions		(915	)		(1,299	)
Royalty income		273			160
Other income (expense), net		62			(85	)
Total other expense, net		(586	)		(1,231	)
Income before income taxes		11,527			6,239
Provision for income taxes		1,925			1,247
Net income	$	9,602		$	4,992
Net income per share:
Basic	$	0.20		$	0.11
Diluted	$	0.19		$	0.10
Weighted average shares outstanding:
Basic		47,755			46,617
Diluted		49,288			49,213

See accompanying notes to the condensed consolidated financial statements.

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended
	April 1, 2022			April 2, 2021
Net income	$	9,602		$	4,992
Other comprehensive income:
Defined benefit plans:
Net change in plan assets		4,068			3,084
Reclassification into other income (expense), net		52			120
Foreign currency translation loss		(1,014	)		(1,116	)
Tax effect		(121	)		—
Other comprehensive income, net of tax		2,985			2,088
Comprehensive income	$	12,587		$	7,080

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 December 31, 2021		47,716	$	477	$	373,519	$	(4,048	)	$	(111,390	)	$	258,558
Net income		—		—		—		—			9,602			9,602
Other comprehensive income		—		—		—		2,985			—			2,985
Common stock issued upon exercise of options		49		1		911		—			—			912
Stock-based compensation		—		—		4,260		—			—			4,260
Vested restricted and performance stock		45		—		—		—			—			—
Balance, at April 1, 2022		47,810	$	478	$	378,690	$	(1,063	)	$	(101,788	)	$	276,317

Balance, at January 1, 2021		46,448	$	464	$	338,194	$	(5,545	)	$	(135,891	)	$	197,222
Net income		—		—		—		—			4,992			4,992
Other comprehensive income		—		—		—		2,088			—			2,088
Common stock issued upon exercise of options		376		4		6,230		—			—			6,234
Stock-based compensation		—		—		3,639		—			—			3,639
Vested restricted stock		33		1		—		—			—			1
Balance, at April 2, 2021		46,857	$	469	$	348,063	$	(3,457	)	$	(130,899	)	$	214,176

See accompanying notes to the condensed consolidated financial statements.

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended
	April 1, 2022			April 2, 2021
Cash flows from operating activities:
Net income	$	9,602		$	4,992
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation of property, plant, and equipment		994			865
Amortization of intangibles		8			9
Change in net pension liability		41			127
Loss on disposal of property and equipment		—			2
Stock-based compensation expense		3,894			3,330
Provision for sales returns and bad debts		(194	)		103
Inventory provision		434			384
Changes in working capital:
Accounts receivable		(3,927	)		1,138
Inventories		(1,483	)		984
Prepayments, deposits, and other current assets		(4,505	)		(143	)
Accounts payable		2,668			(399	)
Other current liabilities		(12,142	)		(4,626	)
Net cash provided by (used in) operating activities		(4,610	)		6,766
Cash flows from investing activities:
Acquisition of property and equipment		(2,539	)		(2,159	)
Net cash used in investing activities		(2,539	)		(2,159	)
Cash flows from financing activities:
Repayment of finance lease obligations		(18	)		(235	)
Proceeds from the exercise of stock options		912			6,234
Proceeds from vested restricted stock		—			1
Net cash provided by financing activities		894			6,000
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(384	)		(716	)
Increase (decrease) in cash, cash equivalents and restricted cash		(6,639	)		9,891
Cash and cash equivalents, at beginning of the period		199,706			152,453
Cash and cash equivalents, at end of the period	$	193,067		$	162,344

See accompanying notes to the condensed consolidated financial statements.

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 the Comprehensive Financial Statements have been condensed or omitted pursuant to such rules and regulations. The Consolidated Balance Sheet as of December 31, 2021 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 31, 2021.

The Condensed Consolidated Financial Statements for the three months ended April 1, 2022 and April 2, 2021, 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 April 1, 2022 and April 2, 2021, 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.

Vendor Concentration

There were no vendors that accounted for over 10% of the Company’s consolidated accounts payable as of April 1, 2022 and December 31, 2021. There were no vendors that accounted for over 10% of the Company’s consolidated purchases for the three months ended April 1, 2022 and April 2, 2021, respectively.

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):

	April 1, 2022			December 31, 2021
Raw materials and purchased parts	$	4,480		$	3,971
Work in process		3,599			4,031
Finished goods		11,538			10,429
Total inventories, gross		19,617			18,431
Less inventory reserves		(1,167	)		(1,157	)
Total inventories, net	$	18,450		$	17,274

STAAR SURGICAL COMPANY

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

Note 3 — Prepayments, Deposits, and Other Current Assets

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

	April 1, 2022		December 31, 2021
Prepayments and deposits	$	4,999	$	4,047
Prepaid insurance		2,523		2,647
Prepaid marketing		2,227		543
Consumption tax receivable		294		830
Value added tax (VAT) receivable		2,348		2,197
BVG (Swiss Pension) prepayment		1,229		15
Other⁽¹⁾		1,691		621
Total prepayments, deposits and other current assets	$	15,311	$	10,900

⁽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):

	April 1, 2022			December 31, 2021
Machinery and equipment	$	25,116		$	24,127
Computer equipment and software		9,000			8,807
Furniture and fixtures		3,627			3,658
Leasehold improvements		11,991			11,821
Construction in process		25,215			21,827
Total property, plant and equipment, gross		74,949			70,240
Less accumulated depreciation		(35,304	)		(34,328	)
Total property, plant and equipment, net	$	39,645		$	35,912

Note 5 –Intangible Assets

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

April 1, 2022

December 31, 2021

Long-lived amortized intangible assets

Gross

Carrying

Amount

Accumulated

Amortization

Net

Gross

Carrying

Amount

Accumulated

Amortization

Net

Patents and licenses

9,279

(9,076

)

203

9,315

(9,097

)

218

Note 6 – Other Current Liabilities

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

	April 1, 2022		December 31, 2021
Accrued salaries and wages	$	6,801	$	12,030
Accrued bonuses		1,466		8,091
Income taxes payable		2,872		2,248
Marketing obligations		2,415		2,243
Other⁽¹⁾		5,882		7,265
Total other current liabilities	$	19,436	$	31,877

⁽¹⁾	No individual item in “Other” exceeds 5% of the other current liabilities.

STAAR SURGICAL COMPANY

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

Note 7 – Leases

Finance Leases

The Company entered into finance leases primarily related to purchases of equipment used for manufacturing, computer-related equipment or furniture and fixtures. 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 consisted of the following (dollars in thousands):

	April 1, 2022			December 31, 2021
Machinery and equipment	$	33		$	35
Computer equipment and software		19			506
Furniture and fixtures		475			475
Finance lease right-of-use assets, gross		527			1,016
Less accumulated depreciation		(66	)		(510	)
Finance lease right-of-use assets, net	$	461		$	506

Total finance lease liability	$	489		$	509
Weighted-average remaining lease term (in years)		3.0			3.2
Weighted-average discount rate		4.06	%		4.02	%

Supplemental cash flow information related to finance leases consisted of the following (dollars in thousands):

	Three Months Ended
	April 1, 2022		April 2, 2021
Amortization of finance lease right-of-use asset	$	43	$	36
Interest on finance lease liabilities		3		4
Cash paid for amounts included in the measurement of finance lease liabilities:
Operating cash flows		3		4
Financing cash flows		18		235

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 ten years in length with options to extend. The Company does 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 consisted of the following (dollars in thousands):

	April 1, 2022			December 31, 2021
Machinery and equipment	$	808		$	760
Computer equipment and software		472			472
Real property		34,911			34,426
Operating lease right-of-use assets, gross		36,191			35,658
Less accumulated depreciation		(5,161	)		(4,348	)
Operating lease right-of-use assets, net	$	31,030		$	31,310

Total operating lease liability	$	31,370		$	31,552
Weighted-average remaining lease term (in years)		7.5			7.8
Weighted-average discount rate		3.59	%		3.56	%

STAAR SURGICAL COMPANY

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

Note 7 – Leases (Continued)

Operating Leases (Continued)

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

	Three Months Ended
	April 1, 2022		April 2, 2021
Operating lease cost	$	1,138	$	783
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows		932		785
Right-of-use assets obtained in exchange for new operating lease liabilities		675		651

Maturities of Lease Liabilities

Maturities of lease liabilities under operating and finance leases having initial or remaining non-cancelable lease terms more than one year as of April 1, 2022 is as follows (in thousands):

As of April 1, 2022

12 Months Ended

Operating Leases