UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended . . . . . . . . . . . . . . . . . .March 31, 1995
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 (I.R.S. Employer
Incorporation or organization) Identification No.)
1911 Walker Avenue
Monrovia, California 91016
(Address of principal executive offices)
(Zip Code)
(818) 303-7902
(Registrant's telephone number including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
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 X NO
----- -----
The Registrant has 12,801,064 shares of common stock, par value $0.01 per
share, issued and outstanding as of May 11, 1995.
Total number of sequentially numbered pages in this document: 10
STAAR SURGICAL COMPANY
INDEX
PART I PAGE NUMBER
Item 1 - Financial Information
Condensed Consolidated Balance Sheets - March 31, 1995
and December 30, 1994.................................................... 3
Condensed Consolidated Statements of Income - Three Months Ended
March 31, 1995 and April 1, 1994......................................... 4
Condensed Consolidated Statements of Cash Flows - Three Months Ended
March 31, 1995 and April 1, 1994......................................... 5
Notes to Condensed Consolidated Financial Statements..................... 6
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 8
PART II
Other Information....................................................... 9
Signature Page.......................................................... 10
2
STAAR SURGICAL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS MARCH 31, 1995 DECEMBER 30, 1994
- ------ -------------- -----------------
Current assets:
Cash and cash equivalents $ 3,399,848 $ 3,203,887
Accounts receivable, less allowance
for doubtful accounts and estimated
returns 5,134,672 5,307,708
Inventories 9,004,133 8,578,646
Prepaids, deposits and other current
assets 616,975 609,623
Deferred income tax 2,400,000 2,400,00
------------ ------------
Total current assets 20,555,628 20,099,864
Investment in joint venture 1,974,199 1,791,485
Property, plant and equipment, net 4,347,265 4,035,562
Patents and licenses, net 2,509,333 1,885,898
Other assets 1,037,893 1,075,392
------------ ------------
Total Assets $ 30,424,318 $ 28,888,201
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable $ 1,254,320 $ 1,465,850
Current portion of long-term debt 641,372 326,375
Accounts payable 871,327 1,109,364
Other current liabilities 3,013,611 3,032,777
------------ ------------
Total current liabilities 5,780,630 5,934,366
------------ ------------
Long term debt 1,009,282 571,755
Deferred gain on sale of license 284,375 331,250
Other long term liabilities 19,225 21,871
------------ ------------
Total liabilities 7,093,512 6,859,242
------------ ------------
Stockholders' equity:
Common stock $0.01 par value,
20,000,000 shares authorized;
issued and outstanding 12,732,509
at March 31, 1995 and 12,704,461
at December 30, 1994 127,325 127,045
Capital in excess of par value 40,814,334 41,158,736
Accumulated deficit (15,284,838) (16,930,807)
------------ ------------
25,656,821 24,354,974
Notes and other receivables (2,326,015) (2,326,015)
------------ ------------
Total stockholders' equity 23,330,806 22,028,959
------------ ------------
Total Liabilities and Stockholders'
Equity $ 30,424,318 $ 28,888,201
============ ============
3
STAAR SURGICAL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED
--------------------------------
REVENUES March 31, 1995 APRIL 1, 1994
- -------- -------------- -------------
Sales $7,307,599 $5,532,998
Royalty Income --- 239,000
---------- ----------
Total Revenues 7,307,599 5,771,998
Cost of Sales 1,753,910 1,284,995
---------- ----------
Gross Profit 5,553,689 4,487,003
Selling, General and Administrative Expenses:
General & Administrative 1,029,799 1,315,251
Marketing & Selling 2,196,705 1,598,886
Research & Development 739,173 663,209
---------- ----------
Total Selling General & Administrative Expense 3,965,677 3,577,346
Operating Income 1,588,012 909,657
---------- ----------
Other Income (expense)
Equity in Earnings of Joint Venture 229,600 287,521
---------- ----------
Interest Expense - Net (20,164) (27,124)
---------- ----------
Other Expense (92,548) ----
---------- ----------
Total Other Income - Net 116,888 260,397
Income Before Income Taxes 1,704,900 1,170,054
Income Tax Provision 58,931 38,371
---------- ----------
Net Income $1,645,969 $1,131,683
========== ==========
Income per Share:
Primary $0.12 $0.09
===== =====
Fully Diluted $0.12 $0.09
===== =====
4
STAAR SURGICAL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS MARCH 31, 1995 APRIL 1, 1994
- ------------------------------------------------ -------------- -------------
Cash Flows from Operating activities:
Net Income $ 1,645,969 $ 1,131,683
Adjustments to reconcile operating activities:
Depreciation and amortization 384,878 282,066
Income in equity of joint venture (229,600) (287,521)
Services performed in satisfaction of notes receivable ---- 23,438
Stock issued in exchange for services 325,000 325,000
Other (26,094) (5,999)
Change in working capital (413,539) (1,575,295)
----------- -----------
Net cash provided by (used in) operating activities 1,686,614 (106,628)
Cash flows from investing activities:
Acquisition of property, plant and equipment (579,058) (365,369)
Increase in patent and licenses (680,001) (171,205)
----------- -----------
Net cash used in investing activities (1,259,059) (536,574)
Cash flows from financing activities:
Net borrowings under debt financing 437,527 (220,143)
Proceeds from exercise of stock options & warrants 313,220 275,370
Payments for repurchase of common stock (982,341) ----
----------- -----------
Net cash provided by (used in) financing activities (231,594) 55,227
Increase (decrease) in cash and cash equivalents 195,961 (587,975)
Cash and cash equivalents at beginning of period 3,203,887 1,401,410
----------- -----------
Cash and cash equivalents at end of period $ 3,399,848 $ 813,435
=========== ===========
5
STAAR SURGICAL COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
--------------
1. BASIS OF PRESENTATION
---------------------
The accompanying financial statements consolidate the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. Assets
and liabilities of foreign subsidiaries are translated at rates of exchange
in effect at the close of the period. Revenues and expenses are translated
at the weighted average of exchange rates in effect during the year. Net
foreign currency translation and transaction gains and losses were not
material. Investments in affiliates and joint ventures are accounted for
using the equity method of accounting.
2. REVENUE RECOGNITION
-------------------
The Company records revenues from product sales to hospitals and physicians
principally upon implant of IOL's from cataract surgery. Revenues from
product sales to distributors (primarily export sales) are recorded upon
shipment. Revenue from license and technology agreements is recorded as
income in accordance with the terms of such agreements.
3. EXPORT SALES
------------
During the three months ended March 31, 1995 and April 1, 1994, the Company
had export sales primarily to Europe and South Africa, South America,
Australia and Japan, of approximately $1,681,000 and $865,000.
4. INVENTORIES
-----------
Inventories are valued at the lower of cost (first-in, first-out) or market
(net realizable value) and consisted of the following at March 31, 1995 and
December 30, 1994.
March 31, 1995 December 30, 1994
-------------- -----------------
Raw materials and purchased parts $ 610,862 $ 602,058
Work in process 1,305,626 1,263,943
Finished goods 7,087,645 6,712,645
---------- ----------
$9,004,133 $8,578,646
========== ==========
5. PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment are stated at cost.
Depreciation is provided on the straight-line method over the estimated
useful lives, which are generally not greater than five years. Leasehold
improvements are amortized over the life of the lease or estimated useful
life, if shorter.
6. PATENTS AND LICENSES
--------------------
The Company capitalizes the costs of acquiring patents and licenses as well
as the legal costs of successfully defending its rights to these patents.
Amortization is computed on the straight-line basis over the estimated
useful lives, which range from 8 to 12 years.
6
7. INCOME PER SHARE
----------------
Income per share computations are based on the weighted average number of
common shares and common equivalent shares outstanding during each period.
Common equivalent shares include the dilutive effects from the assumed
exercise of stock options and warrants computed using the treasury stock
method. The shares used to calculate primary earnings per share were
13,478,434 for March 31, 1995 and 13,234,414 for April 1, 1994 . The shares
used to calculate fully diluted earnings per share were 13,478,434 for
March 31, 1995 and 13,234,414 for April 1, 1994.
8. CASH EQUIVALENTS
----------------
For purposes of the cash flow statements, the Company considers all highly
liquid investments with an original maturity of three months or less to be
cash equivalents.
9. INTERIM ACCOUNTING POLICY
-------------------------
The accompanying unaudited condensed consolidated financial statements do
not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements and
should, therefore, be read in conjunction with the audited financial
statements included in the Company's annual report on Form 10-K for the
year ended December 30, 1994.
Certain reclassifications have been made to the April 1, 1994 consolidated
financial statements to conform with the 1995 presentation.
In the opinion of management, the accompanying condensed consolidated
financial statements contain all adjustments (of a normal recurring nature)
necessary to present fairly the Company's consolidated financial position
as of March 31, 1995, its consolidated results of operations for the three
months ended March 31, 1995 and April 1, 1994 and its consolidated cash
flows for the three months ended March 31, 1995 and April 1, 1994.
7
PART 1 - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS:
RESULTS OF OPERATIONS
- ---------------------
The following table sets forth for the periods: (1) the percentage which certain
items reflected in the financial data bear to sales and, (2) the percentage
increase of such items as compared to the indicated prior period.
Relationship To Total Revenues For Percentage change
Three Months ended for Three Months
March 31, 1995 April 1, 1994 1995 vs 1994
--------------- ----------------- -------------------
Increase (Decrease)
Total Revenues 100.0% 100.0% 26.6%
Cost of Sales 24.0 22.3 36.5
General & Administrative 14.1 22.8 (21.7)
Marketing & Selling 30.1 27.7 37.4
Research & Development 10.1 11.5 11.5
Other Income 1.6 4.5 (55.1)
Net Income 22.5 19.6 45.4
REVENUES:
- ---------
The Company's revenues for the three months ended March 31, 1995 were $7.3
million compared to $5.8 million for three months ended April 1, 1994, a 26.6%
increase. The primary reason for this increase is expanding international sales
in Europe, South Africa, Australia, and the continuing acceptance of STAAR's
product in the U.S. The Company did not report any royalty payments in the
current quarter and expect royalties to be minimal if any for the remainder of
the year.
COST OF SALES:
- --------------
The Cost of Sales increased to 24.0% of revenues for the three months ended
March 31, 1995 from 22.3% of revenues for the three months April 1, 1994. The
primary reasons for this increase were reduced pricing of the Company's products
in the domestic market.
GENERAL & ADMINISTRATIVE (G&A):
- -------------------------------
G&A expense decreased to 14.1% of revenues for the three months ended March 31,
1995 from 22.8% of revenues for the three months ended April 1, 1994. This
decrease is the result of a continued focus on controlling G&A expense and the
result of fewer management personnel.
MARKETING AND SELLING (M&S):
- ----------------------------
Marketing and selling expenses increased to 30.1% of revenues for the three
months ended March 31, 1995 compared to 27.7% of revenues for the three months
ended April 1, 1994. The primary reason for the increase is increased staffing
internationally to achieve the current and expected increase in international
sales and increased advertising cost.
RESEARCH AND DEVELOPMENT (R&D):
- -------------------------------
R&D expense decreased to 10.1% of revenues for the first quarter ending March
31, 1995 compared to 11.5% of revenues for the first quarter ending April 1,
1994. The Company expects to continue to spend around ten
8
percent of revenues for the continued development and approval of products
currently in the development stage and for new products in the research stage.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of March 31, 1995, the Company had a current ratio of 3.6:1, net working
capital of $14.8 million and net equity of $23.3 million compared to December
30, 1994 when the Company's ratio was 3.4:1, its net working capital was $14.2
million, and its net equity was $22.0 million.
The Company used approximately $1.0 million of its working capital in the first
quarter of 1995 to buy back approximately 100,000 shares of its common stock.
The Company, as management determines feasible, will continue to buy back up to
1,000,000 shares of common stock, options and/or warrants.
The Company expects to continue to be profitable in the future and the Company
believes that all future cash flow needs will come from cash generated by
operations. Should additional funding be needed the Company believes that as
long as the financial position of the Company remains constant, these funds
could be obtained.
PART II - ITEM 1
OTHER INFORMATION
- -----------------
On April 3, 1995, the Company received approval of its Ultraviolet ("UV")
absorbing material by the U.S. Food and Drug Administration ("FDA") for use in
Intraocular lenses ("IOL") in the United States.
Item 6. Exhibits and Reports on Form 8-K
-------------------------------
Exhibits
--------
27 Financial Data Schedule
Reports on Form 8-K.
--------------------
None
9
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 thereunto duly authorized.
STAAR SURGICAL COMPANY
Date: May 15, 1995 By: /s/ WILLIAM C. HUDDLESTON
-----------------------------
William C. Huddleston
Chief Financial Officer and
Duly Authorized Officer
(principal accounting and financial
officer for the quarter)
10