UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): March 2, 2010
STAAR Surgical Company
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation) | 0-11634 (Commission File Number) | 95-3797439 (I.R.S. Employer Identification No.) |
| | | |
1911 Walker Ave, Monrovia, California (Address of principal executive offices) | | 91016 (Zip Code) |
Registrant’s telephone number, including area code: 626-303-7902
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.01 Completion of Acquisition or Disposition of Assets
Divestiture of Domilens GmbH
On March 2, 2010 STAAR Surgical Company (“STAAR” or “we”) completed the divestiture (the “Transaction”) of all of its interest in its German distribution subsidiary, Domilens GmbH (“Domilens”) through a management buyout led by funds managed by Hamburg-based Small Cap Buyout Specialist BPE Unternehmensbeteiligungen GmbH (“BPE”). To effectuate the Transaction STAAR Surgical AG (“STAAR AG”), STAAR’s Swiss subsidiary and holder of 100% of the shares of Domilens, signed a Stock Purchase Agreement (the “Agreement”) with Domilens Akquisitions GmbH (“Domilens Acquisitions”) on February 24, 2010. Domilens Akquisitions is a newly formed entity 74% owned by BPE and 26% owned by senior management of Domilens.
The Agreement provides for a Purchase Price of €10,512,100 (approximately US$14.3 million at currently prevailing exchange rates). After adjusting for €800,000 in cash dividends received by STAAR from Domilens in December 2009 and January 2010, and the exclusion of expenses related to compliance with the Sarbanes-Oxley Act of 2002, at closing on March 2, 2010 Domilens Akquisitions paid a cash Net Purchase Price of €9,685,700 (approximately US$13.2 million at currently prevailing exchange rates). €100,000 of the Net Purchase Price was paid into an escrow account, to be held against payment of any unaccrued taxes assessed for periods prior to December 31, 2009. Funds remaining after the resolution of such potential liabilities, if any, will be distributed to STAAR from the escrow account, no later than December 31, 2011.
Based on the performance of Domilens in fiscal years 2010, 2011 and 2012, STAAR may earn up to an additional €675,000 (approximately $920,000 at currently prevailing exchange rates). These additional “earn-out” payments will be paid on achievement of specified earnings before income tax (“EBIT”) as set forth below. If a target is missed in any year, but in the following year Domilens achieves the target and also makes up for the earlier shortfall, the payments for both years will be earned and paid.
| Fiscal Year | Domilens EBIT | Earn-Out Payment |
| 2010 | €2,500,000 | €200,000 |
| 2011 | €2,900,000 | €225,000 |
| 2012 | €3,500,000 | €250,000 |
After expenses, and excluding the escrowed funds and any earn-out payments, STAAR expects to receive net cash proceeds of approximately €10,054,000 from the transaction (approximately US$13.6 million at currently prevailing exchange rates).
In connection with the Stock Purchase Agreement, STAAR on February 24, 2010 entered into a Distribution Agreement with Domilens providing for the continued sale of certain STAAR products following the transfer of ownership. The Distribution Agreement has a term of five years. During the first three years of the term Domilens will be the exclusive distributor of covered products in Germany and Austria, subject to Domilens achieving minimum purchase levels. After the initial three-year period Domilens will have non-exclusive distribution rights for these STAAR products, unless the parties agree to an extension of the exclusivity. The following products are covered by the Distribution Agreement: preloaded silicone and acrylic IOL injectors; the Visian ICL, Visian Toric ICL and Visian Hyperopic ICL.
STAAR's Current Report on Form 8-K filed on March 2, 2010, inadvertently reported the date of the Agreement and Distribution Agreement as February 23, 2010. Both agreements were signed on February 24, 2010.
Forward-Looking Statements
Any statements in this report that are not historical in nature are forward-looking statements, including statements regarding any future payment that may be received by STAAR as a result of the earn-out provisions or the escrow account provided for in the Stock Purchase Agreement. The earn-out payments will be earned only if Domilens significantly improves its performance over levels it has historically been able to achieve. Domilens may not be able to achieve these improvements. The escrow account will be used to pay any additional unaccrued taxes that the German tax authorities may assess after their next audit, which STAAR cannot predict and may leave little or no funds in the escrow account remaining for distribution to STAAR.
Item 2.02 Results of Operations and Financial Condition.
On March 2, 2010, STAAR published a press release reporting its financial results for the quarter and fiscal year ended January 1, 2010 (the Press Release"), a copy of which is furnished as Exhibit 99.1 to this report and is incorporated herein by this reference.
Item 7.01 Regulation FD Disclosure.
On March 2, 2010 STAAR held a conference call to discuss the financial results for the quarter and fiscal year ended January 1, 2010. An archive of the webcast of the conference call has been posted on the Company's website at www.staar.com. A transcript of the conference call is furnished as Exhibit 99.2 to this report and is incorporated herein by this reference.
Item 9.01 – Financial Statements and Exhibits
(b) Pro Forma Financial Information.
| (i) | | Pro Forma Condensed Consolidated Balance Sheet as of October 2, 2009; |
| (ii) | | Pro Forma Condensed Consolidated Statement of Operations for the fiscal year ended January 2, 2009; |
| (iii) | | Pro Forma Condensed Consolidated Statement of Operations for the nine months ended October 2, 2009; |
The unaudited pro forma statements of operations for the year ended January 2, 2009 and the nine months ended October 2, 2009 give effect to the divestiture of Domilens as if STAAR had disposed of Domilens on December 29, 2007, the first day of our 2008 fiscal year. The pro forma balance sheet as of October 2, 2009 gives effect to the divestiture of Domilens as if STAAR had disposed of it on October 2, 2009.
The pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable under the circumstances. The pro forma adjustments were applied to the respective historical financial statements to reflect and account for the disposition of Domilens.
The unaudited pro forma consolidated statements of operations and consolidated balance sheet have been prepared for illustrative purposes only and do not exclude cost savings from operational efficiencies, revenue synergies or operating strategies employed prior to the disposition. Therefore, the pro forma financial information is not necessarily indicative of the operating results that we would have achieved had the disposition occurred on December 29, 2007 or our financial position had the disposition occurred on October 2, 2009 and should not be construed as a representation of our future operating results or financial position.
The unaudited pro forma consolidated financial information should be read in conjunction with our audited Consolidated Financial Statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 2, 2009 and the unaudited interim Consolidated Financial Statements and the notes thereto included in our quarterly report on Form 10-Q for the quarter ended October 2, 2009.
(b) Exhibits.
Exhibit No. | Description |
| 99.1 | Press release of the Company dated March 2, 2010. |
| 99.2 | Transcript of conference call of the Company held on March 2, 2010. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| March 8, 2010 | STAAR Surgical Company By: _________________ Barry G. Caldwell President and Chief Executive Officer |
| STAAR Surgical Company | | In $000s | | | In $000s | | | In $000s | | | | PRO FORMA | |
| As of October 2, 2009 | | As Reported | | | Pro Forma Adjustments to | | | | In $000s | |
| | | 10/2/2009 | | | Dispose Domilens | | | | 10/30/2009 | |
| BALANCE SHEET | | Consolidated | | | Deconsolidate | | | Assumed | | | | EX Domilens | |
| Account Description | | USD | | | Domilens | | | Proceeds* | | Footnotes | | USD | |
| | | | | | | | | | | | | | |
| Cash | | $ | 5,644 | | | $ | (768 | ) | | $ | 12,998 | | (A) | | $ | 17,874 | |
| Restricted Cash | | | 7,368 | | | | | | | | 136 | | (B) | | | 7,504 | |
| Accounts Receivable, net | | | 9,411 | | | | (2,169 | ) | | | | | | | | 7,242 | |
| Inventory, net | | | 15,296 | | | | (3,645 | ) | | | | | | | | 11,651 | |
| Prepaids & other current | | | 2,196 | | | | (633 | ) | | | | | | | | 1,563 | |
| Other current assets | | | | | | | | | | | 98 | | (C) | | | 98 | |
| Total Current Assets | | $ | 39,915 | | | $ | (7,215 | ) | | $ | 13,232 | | | | $ | 45,932 | |
| | | | | | | | | | | | | | | | | | |
| PP&E, net | | | 5,180 | | | | (1,152 | ) | | | | | | | | 4,028 | |
| Intangibles, net | | | 5,039 | | | | | | | | | | | | | 5,039 | |
| Goodwill | | | 7,847 | | | | (6,302 | ) | | | | | | | | 1,545 | |
| Other assets | | | 1,242 | | | | - | | | | | | | | | 1,242 | |
| Total Assets | | $ | 59,223 | | | $ | (14,669 | ) | | $ | 13,232 | | | | $ | 57,786 | |
| | | | | | | | | | | | | | | | | | |
| Accounts Payable | | | 6,182 | | | | (2,057 | ) | | | | | | | | 4,125 | |
| Other Current Liabilities | | | 13,351 | | | | (777 | ) | | | | | | | | 12,574 | |
| | | | | | | | | | | | 476 | | (D) | | | | |
| | | | | | | | | | | | 136 | | (E) | | | | |
| | | | | | | | | | | | 64 | | (F) | | | | |
| | | | | | | | | | | | 146 | | (G) | | | 822 | |
| | | | | | | | | | | | | | | | | | |
| Line of Credit | | | 2,220 | | | | | | | | | | | | | 2,220 | |
| Total Current Liabilities | | $ | 21,753 | | | $ | (2,834 | ) | | $ | 822 | | | | $ | 19,741 | |
| | | | | | | | | | | | | | | | | | |
| Long Term Liabilities | | | 3,838 | | | | (113 | ) | | | | | | | | 3,725 | |
| Notes Payable | | | 4,389 | | | | | | | | | | | | | 4,389 | |
| Total Liabilities | | $ | 29,980 | | | $ | (2,947 | ) | | $ | 822 | | | | $ | 27,855 | |
| | | | | | | | | | | | | | | | | | |
| Preferred Stock | | | 6,780 | | | | | | | | | | | | | 6,780 | |
| | | | | | | | | | | | | | | | | - | |
| Common stock | | | 347 | | | | | | | | | | | | | 347 | |
| APIC | | | 149,268 | | | | | | | | | | | | | 149,268 | |
| AOCI | | | 3,456 | | | | (2,170 | ) | | | | | | | | 1,286 | |
| Accumulated Deficit | | | (130,608 | ) | | | (9,552 | ) | | $ | 12,410 | | | | | (127,750 | ) |
| Total Stockholders' Equity | | $ | 22,463 | | | $ | (11,722 | ) | | $ | 12,410 | | | | $ | 23,151 | |
| | | | | | | | | | | | | | | | | | |
| Tottal S/E, P/S and Liabilities | | $ | 59,223 | | | $ | (14,669 | ) | | $ | 13,232 | | | | $ | 57,786 | |
| (F) Pro Forma Gain calculation | | | |
| Gain on Sale of Domilens: | | $ | 000s | |
| - Proceeds | | $ | 12,410 | |
| - Net Assets (Domilens) | | | (9,552 | ) |
| - Gain on Sale | | $ | 2,858 | |
(A) - Represents the net cash proceeds from the sale of Domilens, net of $136k escrow funds withheld for future contingent tax liabiliy pending tax audits. Detailed as follows: |
| 000s | | EUR | | USD | |
| Sales price | | | 9,686 | | $ | 13,134 | |
| Less: Escrow funds | | | (100 | ) | $ | (136 | )(B) |
| Net sales price per SPA | | | 9,586 | | $ | 12,998 | |
| (B) - Represents the restricted cash escrow established for contingent tax liability pending tax audit by both parties. |
| |
| (C) - Represents receivable from Domilens for Q42009 management fees not yet paid as of close of transaction. |
| |
| (D) - Represents the incentive ($137) and success ($339) fees payable to the investment bank upon closing of transaction. |
| |
| (E) - Represents the restricted cash escrow established for contingent tax liability pending tax audit by both parties. |
| |
| (F) - Represents the total marketing allowance payable by STAAR to the new company in four equal installments. |
| |
| (G) - Represents the estimated tax on sale owed by STAAR. |
| STAAR Surgical Company | | In $000s | | In $000s | | In $000s | | In $000s | |
| Nine Months Ended October 2, 2009 | As Reported | | Pro Forma Adj | | | | Pro Forma | |
| | | 10/2/2009 | | Dispose Domilens | | | | 10/2/2009 | |
| P&L | | Consolidated | % of | Deconsolidate | % of | Pro Forma | | EX Domilens | % of |
| Account Description | | USD | Sales | Domilens | Sales | Adjustments | Footnotes | USD | Sales |
| | | | | | | | | | |
| Net Sales | | $ 55,514 | 100.0% | (17,743) | 100.0% | $ 518 | (a) | 38,289 | 100.0% |
| Cost of Goods Sold | | 24,675 | 44.4% | (10,092) | 56.9% | 211 | (a) | 14,794 | 38.6% |
| Gross Profit | | $ 30,839 | 55.6% | $ (7,651) | 43.1% | $ 307 | (a) | $ 23,495 | 61.4% |
| | | | | | | | | | |
| General & Administrative | | 11,626 | 20.9% | | 0.0% | | | 11,626 | 30.4% |
| Sales and Marketing | | 17,784 | 32.0% | (6,434) | 36.3% | (222) | (b) | 11,128 | 29.1% |
| Research & Development | | 4,395 | 7.9% | | 0.0% | | | 4,395 | 11.5% |
| Total SG&A | | $ 33,805 | 60.9% | $ (6,434) | 36.3% | $ (222) | | $ 27,149 | 70.9% |
| | | | | | | | | | |
| Operating Loss | | (2,966) | -5.3% | (1,217) | 6.9% | 529 | | (3,654) | -9.5% |
| | | | | | | | | | |
| Other Income/(Expense) | | | | | | | | | |
| Interest income | | 36 | 0.1% | (20) | 0.1% | | | 16 | 0.0% |
| Interest expense | | (1,183) | -2.1% | 8 | 0.0% | (105) | (c) | (1,280) | -3.3% |
| FX gain/(loss) | | 200 | 0.4% | 23 | -0.1% | | | 223 | 0.6% |
| Other inc/(exp) | | 122 | 0.2% | (32) | 0.2% | | | 90 | 0.2% |
| Other income/(expense), net | (825) | -1.5% | (21) | 0.1% | (105) | | (951) | -2.5% |
| | | | | | | | | | |
| Loss before Income Taxes | | (3,791) | -6.8% | (1,238) | 7.0% | 424 | | (4,605) | -12.0% |
| Income tax provision | | (926) | -1.7% | 329 | -1.9% | - | | (597) | -1.6% |
| Net Loss | | $ (4,717) | -8.5% | $ (909) | 5.1% | $ 424 | | $ (5,202) | -13.6% |
| | | | | | | | | | |
| Loss per share - basic & diluted | $ (0.15) | | $ (0.03) | | $ 0.01 | | $ (0.16) | |
| | | | | | | | | | |
| Wtd avg shares o/s - basic & diluted | 31,751 | | 31,751 | | 31,751 | | 31,751 | |
| (a) - Represents the intercompany sales and cost of sales made to Domilens which was eliminated in consolidation when |
| Domilens was wholly owned by AG, which would have been earned assuming Domilens was not part of the Company |
| and therefore not eliminated in consolidation. | | | | | | |
| | | | | | | | | |
| (b) - Represents the direct and incremental transaction costs related to the sale of Domilens incurred through the period presented. |
| The Company would not have incurred these expenses had it not been for the sale of Domilens. | | |
| Pro Forma Excludes Management Fees as those are not considered to be earned or available if AG did not own Domilens, |
| | | | | | | | | |
| c) Represents interest expense recorded in connection with the Domilens intercompany loans payable by STAAR that would have |
| not been eliminated had Domilens not been a subsidiary of the Company. | | | | |
| STAAR Surgical Company | | In $000s | | In $000s | | | | In $000s | |
| Fiscal Year Ended January 2, 2009 | As Reported | | Pro Forma Adj | | | | Pro Forma | |
| | | 1/2/2009 | | Dispose Domilens | | | | 1/2/2009 | |
| P&L | | Consolidated | % of | Deconsolidate | % of | Pro Forma | | EX Domilens | % of |
| Account Description | | USD | Sales | Domilens | Sales | Adjustments | Footnotes | USD | Sales |
| | | | | | | | | | |
| Net Sales | | $ 74,894 | 100.0% | (25,124) | 100.0% | $ 1,070 | (a) | 50,840 | 100.0% |
| Cost of Goods Sold | | 34,787 | 46.4% | (14,090) | 56.1% | 511 | (a) | 21,208 | 41.7% |
| Gross Profit | | $ 40,107 | 53.6% | $ (11,034) | 43.9% | $ 559 | (a) | $ 29,632 | 58.3% |
| | | | | | | | | | |
| General & Administrative | | 15,730 | 21.0% | | | | | 15,730 | 30.9% |
| Sales and Marketing | | 27,053 | 36.1% | (8,580) | 34.2% | - | (b) | 18,473 | 36.3% |
| Research & Development | | 7,938 | 10.6% | | | | | 7,938 | 15.6% |
| Other expenses | | 9,773 | 13.0% | | | | | 9,773 | 19.2% |
| Total SG&A | | $ 60,494 | 80.8% | $ (8,580) | 34.2% | $ - | | $ 51,914 | 102.1% |
| | | | | | | | | | |
| Operating Loss | | (20,387) | -27.2% | (2,454) | 9.8% | 559 | | (22,282) | -43.8% |
| | | | | | | | | | |
| Other Income/(Expense) | | | | | | | | | |
| Interest income | | 160 | 0.2% | (47) | 0.2% | | | 113 | 0.2% |
| Interest expense | | (901) | -1.2% | 4 | 0.0% | (116) | (c) | (1,013) | -2.0% |
| FX gain/(loss) | | (696) | -0.9% | 287 | -1.1% | | | (409) | -0.8% |
| Other inc/(exp) | | 152 | 0.2% | (27) | 0.1% | | | 125 | 0.2% |
| Other income/(expense), net | | (1,285) | -1.7% | 217 | -0.9% | (116) | | (1,184) | -2.3% |
| | | | | | | | | | |
| Loss before Income Taxes | | (21,672) | -28.9% | (2,237) | 8.9% | 443 | | (23,466) | -46.2% |
| Income tax provision | | (1,523) | -2.0% | 548 | -2.2% | - | | (975) | -1.9% |
| Net Loss | | $ (23,195) | -31.0% | $ (1,689) | 6.7% | $ 443 | | $ (24,441) | -48.1% |
| | | | | | | | | | |
| Loss per share - basic & diluted | | $ (0.79) | | $ (0.06) | | $ 0.02 | | $ (0.83) | |
| | | | | | | | | | |
| Wtd avg shares o/s - basic & diluted | 29,474 | | 29,474 | | 29,474 | | 29,474 | |
| (a) - Represents the intercompany sales and cost of sales made to Domilens which was eliminated in consolidation when |
| Domilens was wholly owned by AG, which would have been earned assuming Domilens was not part of the Company |
| and therefore not eliminated in consolidation. |
| |
| (b) - Represents the direct and incremental transaction costs related to the sale of Domilens incurred through the period presented. |
| None incurred as of this period presented. |
| Pro Forma Excludes Management Fees as those are not considered to be earned or available if AG did not own Domilens, |
| |
| c) Represents interest expense recorded in connection with the Domilens intercompany loans payable by STAAR that would have |
| not been eliminated had Domilens not been a subsidiary of the Company. |
