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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

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)

 

(626303-7902

(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.

 

1


 

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.

2


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.

 

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 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.

 

4


 

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.

 

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 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

 

 

6


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.

7


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

%

 

8


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