-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IzH2akM8hjTMp62X71iNBAu+iakuL6//W2uoxdg2sfe7kzhgUT+Ab40WggiXmJbM 8m8AgmBl3tEEC07Yx45tLA== 0000898430-95-002399.txt : 19951120 0000898430-95-002399.hdr.sgml : 19951120 ACCESSION NUMBER: 0000898430-95-002399 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950929 FILED AS OF DATE: 19951115 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: STAAR SURGICAL COMPANY CENTRAL INDEX KEY: 0000718937 STANDARD INDUSTRIAL CLASSIFICATION: OPHTHALMIC GOODS [3851] IRS NUMBER: 953797439 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11634 FILM NUMBER: 95593279 BUSINESS ADDRESS: STREET 1: 1911 WALKER AVE CITY: MONROVIA STATE: CA ZIP: 91016 BUSINESS PHONE: 8183037902 MAIL ADDRESS: STREET 1: 1911 WALKER AVE CITY: MONROVIA STATE: CA ZIP: 91016 10-Q 1 FORM 10-Q DATED 09/29/95 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 . . . . . . . . . . . . . . . September 29, 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 12,745,765 shares of common stock, par value $0.01 per share, issued and outstanding as of November 10, 1995. Total number of sequentially numbered pages in this document: 8 STAAR SURGICAL COMPANY INDEX
PAGE NUMBER PART I Item 1 - Financial Information Condensed Consolidated Balance Sheets - September 29, 1995 and December 30, 1994......................................................... 1 Condensed Consolidated Statements of Income - Three and Nine Months Ended September 29, 1995 and September 30, 1994..................................... 2 Condensed Consolidated Statements of Cash Flows - Nine Month Ended September 29, 1995 and September 30, 1994..................................... 3 Notes to Condensed Consolidated Financial Statements.......................... 4 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations......................................................... 6 PART II Other Information............................................................. 7 Signature Page................................................................ 8
STAAR SURGICAL COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 29, 1995 DECEMBER 30, 1994 ------------------ ----------------- ASSETS - ------ Current assets: Cash and cash equivalents $ 4,100,066 $ 3,203,887 Accounts receivable, less allowance for doubtful 6,308,416 5,307,708 accounts and estimated returns Inventories 9,242,616 8,578,646 Prepaids, deposits and other current assets 1,226,039 609,623 Deferred income tax 2,400,000 2,400,000 ------------ ------------ Total current assets 23,277,137 20,099,864 Investment in joint venture 2,196,144 1,791,485 Property, plant and equipment, net 4,480,315 4,035,562 Patents and licenses, net 3,298,209 1,857,729 Other assets 1,618,318 1,103,561 ------------ ------------ Total Assets $ 34,870,123 $ 28,888,201 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Notes payable $ 2,170,470 $ 1,465,850 Current portion of long-term debt 819,148 326,375 Accounts payable 1,176,640 1,109,364 Other current liabilities 2,835,457 3,032,777 ------------ ------------ Total current liabilities 7,001,715 5,934,366 ------------ ------------ Long term debt 1,091,128 571,755 Deferred gain on sale of license 190,625 331,250 Other long term liabilities 13,373 21,871 ------------ ------------ Total liabilities 8,296,841 6,859,242 ------------ ------------ Stockholders' equity: Common stock $0.01 par value, 20,000,000 shares authorized; issued and outstanding 12,655,804 at September 29, 1995 and 12,704,461 at December 30, 1994 126,558 127,045 Capital in excess of par value 40,178,717 41,158,736 Accumulated deficit (11,405,978) (16,930,807) ------------ ------------ 28,899,297 24,354,974 Notes and other receivables (2,326,015) (2,326,015) ------------ ------------ Total stockholders' equity 26,573,282 22,028,959 ------------ ------------ Total Liabilities and Stockholders' Equity $ 34,870,123 $ 28,888,201 ============ ============
1 STAAR SURGICAL COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED ---------------------------------------- ---------------------------------------- REVENUES SEPTEMBER 29, 1995 SEPTEMBER 30, 1994 SEPTEMBER 29, 1995 SEPTEMBER 30, 1994 - -------- ------------------ ------------------ ------------------ ------------------ Sales $8,958,550 $6,580,019 $24,713,890 $18,379,909 Royalty income ---- 333,221 ---- 893,280 ---------- ---------- ----------- ----------- Total revenues 8,958,550 6,913,240 24,713,890 19,273,189 Cost of sales 2,183,496 1,644,660 5,964,871 4,386,488 ---------- ---------- ----------- ----------- Gross profit 6,775,054 5,268,580 18,749,019 14,886,701 Selling, general and administrative expenses: General and administrative 1,336,591 1,079,503 3,547,375 3,602,374 Marketing and selling 2,508,820 2,088,952 7,580,838 5,671,358 Research and development 773,906 662,746 2,272,711 2,005,702 ---------- ---------- ----------- ----------- Total selling general and administrative expense 4,619,317 3,831,201 13,400,924 11,279,434 Operating income 2,155,737 1,437,379 5,348,095 3,607,267 ---------- ---------- ----------- ----------- Other income (expense) Equity in earnings of joint venture 165,882 344,038 545,302 809,585 Interest expense - net (32,716) (51,597) (155,449) (130,684) Other expense (126,653) 1,652 (43,201) (12,339) ---------- ---------- ----------- ----------- Total other income - net 6,513 294,093 346,652 666,562 Income before income taxes 2,162,250 1,731,472 5,694,747 4,273,829 Income tax provision 54,926 50,844 169,918 135,371 ---------- ---------- ----------- ----------- Net income $2,107,324 $1,680,628 $ 5,524,829 $ 4,138,458 ========== ========== =========== =========== Income per share: Primary $ 0.16 $ 0.13 $ 0.41 $ 0.32 ========== ========== =========== =========== Fully diluted $ 0.16 $ 0.13 $ 0.41 $ 0.32 ========== ========== =========== ===========
2 STAAR SURGICAL COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED ---------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS SEPTEMBER 29, 1995 SEPTEMBER 30, 1994 - ------------------------------------------------ ------------------ ------------------ Cash flows from operating activities: Net income $ 5,524,829 $ 4,138,458 Adjustments to reconcile operating activities: Depreciation and amortization 1,052,676 825,030 Income in equity of joint venture (545,284) (809,585) Services performed in satisfaction of notes receivable ---- 46,875 Stock issued in exchange for services 325,000 346,125 Other (30,117) 29,764 Change in working capital (2,411,138) (3,682,735) ----------- ----------- Net cash provided by operating activities 3,915,966 893,932 Cash flows from investing activities: Acquisition of property, plant and equipment (1,354,302) (1,103,689) Increase in patent and licenses (2,076,745) (578,626) ----------- ----------- Net cash used in investing activities (3,431,047) (1,682,315) Cash flows from financing activities: Net borrowings under debt financing 1,716,766 (332,104) Proceeds from exercise of stock options & warrants 211,156 704,495 Proceeds from collection of notes receivable ---- 25,000 Payments for repurchase of common stock (1,516,662) ---- ----------- ----------- Net cash provided by financing activities 411,260 397,391 Increase (decrease) in cash and cash equivalents 896,179 (390,992) Cash and cash equivalents at beginning of period 3,203,887 1,401,410 ----------- ----------- Cash and cash equivalents at end of period $ 4,100,066 $ 1,010,418 =========== ===========
3 STAAR SURGICAL COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 29, 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. Certain reclassifications have been made to the 1994 consolidated financial statements to conform with the 1995 presentation. 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 nine months ended September 29, 1995 and September 30, 1994, the Company had export sales primarily to Europe and South Africa, South America, Australia and Japan, of approximately $5,373,339 and $2,865,000. 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 September 29, 1995 and December 30, 1994.
September 29, 1995 December 30, 1994 ------------------ ----------------- Raw materials and purchased parts $ 806,430 $ 602,058 Work in process 2,186,168 1,263,943 Finished goods 6,250,018 6,712,645 ---------- ---------- $9,242,616 $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. 4 STAAR SURGICAL COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 29, 1995 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. 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 13,335,359 for September 29, 1995 and 13,005,984 for September 30, 1994. The shares used to calculate fully diluted earnings per share were 13,425,071 for September 29, 1995 and 13,045,319 for September 30, 1994. 8. CASH EQUIVALENTS ---------------- For purposes of the cash flow statement, 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. 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 September 29, 1995 and December 30, 1994, its consolidated statements of income for the three and nine months ended September 29, 1995 and September 30, 1994 and its consolidated cash flows for the nine months ended September 29, 1995 and September 30, 1994. 5 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 Nine Months ended for Nine Months September 29, 1995 September 30, 1994 1995 vs 1994 ------------------ ------------------ ------------------- Increase (Decrease) Total Revenues 100.0% 100.0% 28.2% Cost of Sales 24.1 22.8 36.0 General & Administrative 14.4 18.7 (1.5) Marketing & Selling 30.7 29.4 33.7 Research & Development 9.2 10.4 13.3 Other Income 1.4 3.5 (48.0) Net Income 22.4 21.5 33.5
REVENUES: - --------- The Company's revenues for the nine months ended September 29, 1995 were $24.7 million compared to $18.4 million for nine months ended September 30, 1994, a 28.2% increase. The primary reason for the increase is expanding international sales in Europe, South Africa, Australia, and South America; and continued acceptance of STAAR's product in the U.S. The Company did not report royalty payments for the nine months ended September 29, 1995 and expect royalties to be minimal, if any, for the remainder of the year. However, the Company does expect to report royalty income in 1996. COST OF SALES: - -------------- Cost of Sales increased to 24.4% and 24.1% of revenues for the three and nine months ended September 29, 1995 from 23.8% and 22.8% of revenues for the same periods ended September 30, 1994. The primary reason for the increase was reduced pricing of the Company's products in the domestic market. GENERAL & ADMINISTRATIVE (G&A): - ------------------------------- G&A expense decreased to 14.9% and 14.4% of revenues for the three months and nine months ended September 29, 1995 from 15.6% and 18.7% of revenues for the same periods ended September 30, 1994. The decrease is the result of continued focus in controlling G&A expense. MARKETING AND SELLING (M&S): - ---------------------------- Marketing and selling expenses decreased to 28.0% and increased 30.7% of revenues for the three months and nine months ended September 29, 1995 compared to 30.2% and 29.4% of revenues for the three and nine months ended September 30, 1994. Increases are a result of additional staffing internationally in order to achieve current and expected increases in international revenues as well as a result of increased advertising costs. 6 RESEARCH AND DEVELOPMENT (R&D): - ------------------------------- R&D expense decreased to 8.6% and 9.2% of revenues for the three and nine months ending September 29, 1995 compared to 9.6% and 10.4% of revenues for the three and nine months ending September 30, 1994. The Company expects to continue to spend around ten percent of revenues for the continued development and approval of products currently in the development stage and for new products in the research stage. INCOME TAXES - ------------ Based on current and expected income levels, the Company expects to record an income tax benefit in the fourth quarter as a result of the recognition of the deferred tax asset through the utilization of net operating loss carryforwards. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- As of September 29, 1995, the Company had a current ratio of 3.3:1, net working capital of $16.3 million and net equity of $26.6 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 $1.5 million of its working capital during the first nine months of 1995 to buy back approximately 176,500 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 or debt financing. 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 13, 1995, the Company filed a lawsuit against Alcon Laboratories, Inc. "Alcon" in Los Angeles Superior Court concerning breach of contract, specific performance and other items relating to Alcon's license with the Company, Patent Number 4,573,998, entitled "Methods for Implantation of Deformable Intraocular Lens Structures". This followed an April 12, 1995 lawsuit against the Company from Alcon in the U.S. District Court in Delaware, concerning the same patent for non-infringement and other patent related matters. The Company filed a motion in Delaware to dismiss the Alcon complaint or as an alternative, transfer the actions to California. In October 1995, the motion to transfer the action to California was granted. On July 31, 1995, U.S. District Court for the Central District of California ruled the Company's Antitrust action against Allergan Medical Optics should go forward. In a companion ruling the Court further lifted its stay of discovery of infringement, patent validity, and other issues concerning the U.S. Patent Number 4,681,102 (known as the 102 Patent). The Antitrust action and discovery on these patent issues had previously been stayed pending a determination of ownership of the 102 Patent. During the proceedings the Court also confirmed a June 19, 1995 jury ruling that Microtech is the owner of the 102 Patent. The 102 Patent relates to an insertion device, known as the Bartell Shooter which in the past was used by some surgeons during cataract surgery. The Court did not determine any issue as to infringement of the 102 Patent. The Company believes the 102 Patent will be deemed to be invalid and unenforceable. 7 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: November 14, 1995 By: /s/ William C. Huddleston ---------------------------------- William C. Huddleston Chief Financial Officer and Duly Authorized Officer (principal accounting and financial officer for the quarter) 8 EX-27 2 FDS ART 5 DATED 09/29/95
5 1 9-MOS DEC-29-1995 SEP-29-1995 4,100,066 0 6,406,376 97,960 9,242,616 23,277,137 10,807,059 6,326,744 34,870,123 7,001,715 0 126,558 0 0 26,446,724 34,870,123 24,713,890 24,713,890 5,964,871 5,964,871 12,720,438 53,776 280,058 5,694,747 169,918 5,524,829 0 0 0 5,524,829 .41 .41
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