<PAGE>
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 29, 1996
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 12,851,343 shares of common stock, par value $0.01 per
share, issued and outstanding as of May 8, 1996.
Total number of sequentially numbered pages in this document: 8
<PAGE>
STAAR SURGICAL COMPANY
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
<S> <C>
PART I
Item 1 - Financial Information
Condensed Consolidated Balance Sheets - March 29, 1996
and December 29, 1995................................................. 1
Condensed Consolidated Statements of Income - Three Months Ended
March 29, 1996 and March 31, 1995..................................... 2
Condensed Consolidated Statements of Cash Flows - Three Months Ended
March 29, 1996 and March 31, 1995..................................... 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
</TABLE>
<PAGE>
STAAR SURGICAL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 29, 1996 DECEMBER 29, 1995
-------------- -----------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 4,018,619 $ 3,767,011
Accounts receivable, less allowance
for doubtful accounts and estimated
returns 7,679,956 7,492,439
Inventories 10,814,377 9,591,898
Prepaids, deposits and other current
assets 1,248,286 917,895
Deferred income tax 2,889,223 3,323,724
----------- -----------
Total current assets 26,650,461 25,092,967
Investment in joint venture 2,250,715 2,121,492
Property, plant and equipment, net 7,113,557 6,362,696
Patents and licenses, net 4,424,656 3,538,769
Other assets 1,628,304 1,687,066
----------- -----------
Total assets $42,067,693 $38,802,990
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable $ 4,068,180 $ 3,548,686
Current portion of long-term debt 647,421 480,151
Accounts payable 2,346,252 1,448,135
Other current liabilities 3,097,298 3,281,321
----------- -----------
Total current liabilities 10,159,151 8,758,293
----------- -----------
Long term debt 1,310,975 1,212,178
Deferred gain on sale of license 96,875 143,750
Other long term liabilities 7,989 10,743
----------- -----------
Total liabilities 11,574,990 10,124,964
----------- -----------
Stockholders' equity:
Common stock $0.01 par value,
40,000,000 shares authorized;
issued and outstanding 12,858,028 at
March 29, 1996 and 12,784,148 at
December 29, 1995 128,580 127,841
Capital in excess of par value 40,641,346 40,325,287
Accumulated deficit (7,951,208) (9,449,087)
----------- -----------
32,818,718 31,004,041
Notes and other receivables (2,326,015) (2,326,015)
----------- -----------
Total stockholders' equity 30,492,703 28,678,026
----------- -----------
Total liabilities and stockholders' equity $42,067,693 $38,802,990
=========== ===========
</TABLE>
<PAGE>
STAAR SURGICAL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
MARCH 29, 1996 MARCH 31, 1995
-------------- --------------
<S> <C> <C>
REVENUES
- --------
Sales $9,279,078 $7,307,599
Royalty income 250,000 --
---------- ----------
Total revenues 9,529,078 7,307,599
Cost of sales 2,273,870 1,753,910
---------- ----------
Gross profit 7,255,208 5,553,689
Selling, general and administrative
expenses:
General & administrative 1,423,698 1,029,799
Marketing & selling 2,778,451 2,196,705
Research & development 870,598 739,173
---------- ----------
Total selling general &
administrative expense 5,072,747 3,965,677
Operating income 2,182,461 1,588,012
---------- ----------
Other income (expense)
Equity in earnings of joint
venture 176,098 229,600
Interest expense - net (70,389) (20,164)
Other expense 15,649 (92,548)
---------- ----------
Total other income - net 121,358 116,888
Income before income taxes 2,303,819 1,704,900
Income tax provision 805,940 58,931
---------- ----------
Net income $1,497,879 $1,645,969
========== ==========
Income per share:
Primary $ .11 $ .12
========== ==========
Fully diluted $ .11 $ .12
========== ==========
</TABLE>
<PAGE>
STAAR SURGICAL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------
MARCH 29, 1996 MARCH 31, 1995
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
- -------------------------------------------------
Cash flows from operating activities:
Net income $ 1,497,879 $ 1,645,969
Adjustments to reconcile operating activities:
Depreciation and amortization 651,435 384,878
Recognition of deferred tax asset 434,501 --
Income in equity of joint venture (176,098) (229,600)
Stock issued in exchange for services 325,000 325,000
Other 56,008 (26,094)
Change in working capital (1,026,293) (413,539)
----------- -----------
Net cash provided by (used in) operating activities 1,762,432 1,686,614
Cash flows from investing activities:
Acquisition of property, plant and equipment (1,314,450) (579,058)
Increase in patent and licenses (973,733) (680,001)
----------- -----------
Net cash used in investing activities (2,288,183) (1,259,059)
Cash flows from financing activities:
Net borrowings under debt financing 785,561 437,527
Proceeds from exercise of stock options & warrants 68,798 313,220
Payments for repurchase of common stock (77,000) (982,341)
----------- -----------
Net cash provided by (used in) financing activities 777,359 (231,594)
Increase (decrease) in cash and cash equivalents 251,608 195,961
Cash and cash equivalents at beginning of period 3,767,011 3,203,887
----------- -----------
Cash and cash equivalents at end of period $ 4,018,619 $ 3,399,848
=========== ===========
</TABLE>
<PAGE>
STAAR SURGICAL COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 29, 1996
--------------
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 1995 consolidated financial
statements to conform with the 1996 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 three months ended March 29, 1996 and March 31, 1995, the
Company had export sales primarily to Europe and South Africa, South
America, Australia and Japan, of approximately $2,728,000 and $1,681,000.
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 29, 1996 and
December 29, 1995.
<TABLE>
<CAPTION>
March 29, 1996 December 29, 1995
-------------- -----------------
<S> <C> <C>
Raw materials and purchased parts $ 1,275,011 $1,104,203
Work in process 1,496,400 1,143,119
Finished goods 8,042,966 7,344,576
----------- ----------
$10,814,377 $9,591,898
=========== ==========
</TABLE>
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 ar amortized over the life of the lease or estimated useful
life, if shorter.
<PAGE>
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 17 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
13,877,000 for March 29, 1996 and 13,478,434 for March 31, 1995. The shares
used to calculate fully diluted earnings per share were 13,924,000 for
March 29, 1996 and 13,478,434 for March 31, 1995.
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 29, 1995.
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 29, 1996, its consolidated results of operations for the three
months ended March 29, 1996 and March 31, 1995 and its consolidated cash
flows for the three months ended March 29, 1996 and March 31, 1995.
<PAGE>
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.
<TABLE>
<CAPTION>
Relationship To Total Revenues For Percentage change
Three Months ended for Three Months
March 29, 1996 March 31, 1995 1996 vs 1995
----------------- ---------------- -------------------
Increase (Decrease)
<S> <C> <C> <C>
Total Revenues 100.0% 100.0% 30.4%
Cost of Sales 23.9 24.0 29.6
General & Administrative 14.9 14.1 38.3
Marketing & Selling 29.2 30.1 26.5
Research & Development 9.1 10.1 17.8
Other Income 1.3 1.6 3.8
Income before taxes 24.2 23.3 35.1
Income tax provision 8.5 0.8 1,267.6
Net Income 15.7 22.5 (9.0)
</TABLE>
REVENUES:
- ---------
The Company's revenues for the three months ended March 29, 1996 were $9.5
million compared to $7.3 million for three months ended March 31, 1995, a 30.4%
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.
COST OF SALES:
- --------------
Cost of Sales decreased to 23.9% of revenues for the three months ended March
29, 1996 from 24.0% of revenues for the three months March 31, 1995. The primary
reasons for this decrease was lower product cost related to better efficiencies
in manufacturing.
GENERAL & ADMINISTRATIVE (G&A):
- -------------------------------
G&A expense increased to 14.9% of revenues for the three months ended March 29,
1996 from 14.1% of revenues for the three months ended March 31, 1995. This
increase is the result of investing in the Company's infrastructure to handle
its future growth.
MARKETING AND SELLING (M&S):
- ----------------------------
Marketing and selling expenses decreased to 29.2% of revenues for the three
months ended March 29, 1996 compared to 30.1% of revenues for the three months
ended March 31, 1995. The primary reason for the decrease was due to increases
in sales, without significant increases in cost.
<PAGE>
RESEARCH AND DEVELOPMENT (R&D):
- -------------------------------
R&D expense decreased to 9.1% of revenues for the first quarter ending March 29,
1996 compared to 10.1% of revenues for the first quarter ending March 31, 1995.
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 TAX PROVISION (INCOME TAXES)
- -----------------------------------
Income taxes increased to 8.5% of revenues for the three months ended March 29,
1996 from .8% of revenues for the three months ended March 31, 1995. This is due
to the Company's recording of its remaining book net operating loss
carryforwards as a deferred tax asset of $3.3 million as of December 29, 1995.
The Company has remaining net operating loss carryforwards for tax purposes and
will not be paying Federal income taxes until they are used up.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
In March 1996 the Company refinanced and increased its domestic line of credit
with a different lender. As a result, the Company significantly lowered its
interest rate under the refinancing and increased its line of credit.
As of March 29, 1996, the Company had a current ratio of 2.6:1, net working
capital of $16.5 million and net equity of $30.5 million compared to December
29, 1995 when the Company's current ratio was 2.9:1, its net working capital was
$16.3 million, and its net equity was $28.7 million.
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 additional financing, if required.
PART II - ITEM 1
OTHER INFORMATION
- -----------------
None
<PAGE>
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 13, 1996
By: /s/ William C. Huddleston
-------------------------
William C. Huddleston
Chief Financial Officer and
Duly Authorized Officer
(principal accounting and financial
officer for the quarter)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> MAR-29-1996
<CASH> 4,018,619
<SECURITIES> 0
<RECEIVABLES> 7,807,683
<ALLOWANCES> 127,727
<INVENTORY> 10,814,377
<CURRENT-ASSETS> 26,650,461
<PP&E> 14,060,633
<DEPRECIATION> 6,947,076
<TOTAL-ASSETS> 42,067,693
<CURRENT-LIABILITIES> 10,159,151
<BONDS> 0
0
0
<COMMON> 128,580
<OTHER-SE> 30,364,123
<TOTAL-LIABILITY-AND-EQUITY> 42,067,693
<SALES> 9,279,078
<TOTAL-REVENUES> 9,529,078
<CGS> 2,273,870
<TOTAL-COSTS> 2,273,870
<OTHER-EXPENSES> 5,072,747
<LOSS-PROVISION> 21,079
<INTEREST-EXPENSE> 103,083
<INCOME-PRETAX> 2,303,819
<INCOME-TAX> 805,940
<INCOME-CONTINUING> 1,497,879
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,497,879
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
