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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 2, 2021

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 46,895,095 shares of common stock, par value $0.01 per share, issued and outstanding as of April 30, 2021.

 


 

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

 

17

 

 

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

21

 

 

 

 

ITEM 4.

CONTROLS AND PROCEDURES

 

22

 

 

 

 

PART II – OTHER INFORMATION

 

22

 

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

 

22

 

 

 

 

ITEM 1A.

RISK FACTORS

 

23

 

 

 

 

ITEM 4.

MINE SAFETY DISCLOSURES

 

23

 

 

 

 

ITEM 5.

OTHER INFORMATION

 

23

 

 

 

 

ITEM 6.

EXHIBITS

 

23

 

 

 


 

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)

(Unaudited)

 

 

 

April 2, 2021

 

 

January 1, 2021

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

162,344

 

 

$

152,453

 

Accounts receivable trade, net of allowance of doubtful accounts of

   $60 and $59, respectively

 

 

33,733

 

 

 

35,229

 

Inventories, net

 

 

16,789

 

 

 

18,111

 

Prepayments, deposits and other current assets

 

 

10,649

 

 

 

10,625

 

Total current assets

 

 

223,515

 

 

 

216,418

 

Property, plant and equipment, net

 

 

26,314

 

 

 

24,030

 

Finance lease right-of-use assets, net

 

 

80

 

 

 

596

 

Operating lease right-of-use assets, net

 

 

8,666

 

 

 

8,764

 

Intangible assets, net

 

 

249

 

 

 

270

 

Goodwill

 

 

1,786

 

 

 

1,786

 

Deferred income taxes

 

 

4,536

 

 

 

4,944

 

Other assets

 

 

660

 

 

 

608

 

Total assets

 

$

265,806

 

 

$

257,416

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Line of credit

 

$

1,288

 

 

$

1,379

 

Accounts payable

 

 

7,834

 

 

 

7,874

 

Obligations under finance leases

 

 

124

 

 

 

360

 

Obligations under operating leases

 

 

2,373

 

 

 

2,485

 

Allowance for sales returns

 

 

4,595

 

 

 

4,532

 

Other current liabilities

 

 

19,915

 

 

 

24,606

 

Total current liabilities

 

 

36,129

 

 

 

41,236

 

Obligations under finance leases

 

 

28

 

 

 

38

 

Obligations under operating leases

 

 

6,316

 

 

 

6,537

 

Deferred income taxes

 

 

222

 

 

 

222

 

Asset retirement obligations

 

 

206

 

 

 

221

 

Pension liability

 

 

8,729

 

 

 

11,940

 

Total liabilities

 

 

51,630

 

 

 

60,194

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value; 60,000 shares authorized: 46,857 and

   46,448 shares issued and outstanding at April 2, 2021 and

   January 1, 2021, respectively

 

 

469

 

 

 

464

 

Additional paid-in capital

 

 

348,063

 

 

 

338,194

 

Accumulated other comprehensive loss

 

 

(3,457

)

 

 

(5,545

)

Accumulated deficit

 

 

(130,899

)

 

 

(135,891

)

Total stockholders’ equity

 

 

214,176

 

 

 

197,222

 

Total liabilities and stockholders’ equity

 

$

265,806

 

 

$

257,416

 

 

See accompanying notes to the condensed consolidated financial statements.

 

1


 

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

April 2, 2021

 

 

April 3, 2020

 

Net sales

 

$

50,752

 

 

$

35,187

 

Cost of sales

 

 

11,610

 

 

 

10,427

 

Gross profit

 

 

39,142

 

 

 

24,760

 

Selling, general and administrative expenses:

 

 

 

 

 

 

 

 

General and administrative

 

 

10,212

 

 

 

7,969

 

Selling and marketing

 

 

13,201

 

 

 

11,028

 

Research and development

 

 

8,259

 

 

 

6,898

 

Total selling, general and administrative expenses

 

 

31,672

 

 

 

25,895

 

Operating income (loss)

 

 

7,470

 

 

 

(1,135

)

Other expense, net:

 

 

 

 

 

 

 

 

Interest income (expense), net

 

 

(7

)

 

 

216

 

Loss on foreign currency transactions

 

 

(1,299

)

 

 

(468

)

Royalty income

 

 

160

 

 

 

94

 

Other income (expense), net

 

 

(85

)

 

 

1

 

Total other expense, net

 

 

(1,231

)

 

 

(157

)

Income (loss) before income taxes

 

 

6,239

 

 

 

(1,292

)

Provision (benefit) for income taxes

 

 

1,247

 

 

 

(1,158

)

Net income (loss)

 

$

4,992

 

 

$

(134

)

Net income (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.11

 

 

$

 

Diluted

 

$

0.10

 

 

$

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

46,617

 

 

 

44,953

 

Diluted

 

 

49,213

 

 

 

44,953

 

 

See accompanying notes to the condensed consolidated financial statements.

2


STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

April 2, 2021

 

 

April 3, 2020

 

Net income (loss)

 

$

4,992

 

 

$

(134

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Defined benefit plans:

 

 

 

 

 

 

 

 

Net change in plan assets

 

 

3,084

 

 

 

(25

)

Reclassification into other income (expense), net

 

 

120

 

 

 

70

 

Foreign currency translation loss

 

 

(1,116

)

 

 

(27

)

Tax effect

 

 

 

 

 

4

 

Other comprehensive income, net of tax

 

 

2,088

 

 

 

22

 

Comprehensive income (loss)

 

$

7,080

 

 

$

(112

)

 

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 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, at January 3, 2020

 

 

44,822

 

 

$

448

 

 

$

304,288

 

 

$

(3,048

)

 

$

(141,804

)

 

$

159,884

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(134

)

 

 

(134

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

22

 

 

 

 

 

 

22

 

Common stock issued upon exercise of options

 

 

196

 

 

 

2

 

 

 

2,002

 

 

 

 

 

 

 

 

 

2,004

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,190

 

 

 

 

 

 

 

 

 

3,190

 

Vested restricted stock

 

 

87

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Balance, at April 3, 2020

 

 

45,105

 

 

$

451

 

 

$

309,480

 

 

$

(3,026

)

 

$

(141,938

)

 

$

164,967

 

 

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 2, 2021

 

 

April 3, 2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

4,992

 

 

$

(134

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation of property, plant, and equipment

 

 

865

 

 

 

766

 

Amortization of intangibles

 

 

9

 

 

 

9

 

Deferred income taxes

 

 

 

 

 

(1,369

)

Change in net pension liability

 

 

127

 

 

 

173

 

Loss on disposal of property and equipment

 

 

2

 

 

 

3

 

Stock-based compensation expense

 

 

3,330

 

 

 

2,921

 

Provision for sales returns and bad debts

 

 

103

 

 

 

80

 

Inventory provision

 

 

384

 

 

 

336

 

Changes in working capital:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,138

 

 

 

(3,462

)

Inventories

 

 

984

 

 

 

(491

)

Prepayments, deposits, and other current assets

 

 

(143

)

 

 

(2,446

)

Accounts payable

 

 

(399

)

 

 

907

 

Other current liabilities

 

 

(4,626

)

 

 

(5,464

)

Net cash provided by (used in) operating activities

 

 

6,766

 

 

 

(8,171

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisition of property and equipment

 

 

(2,159

)

 

 

(2,185

)

Net cash used in investing activities

 

 

(2,159

)

 

 

(2,185

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Repayment of finance lease obligations

 

 

(235

)

 

 

(236

)

Repayment on line of credit

 

 

 

 

 

(505

)

Proceeds from the exercise of stock options

 

 

6,234

 

 

 

2,004

 

Proceeds from vested restricted stock

 

 

1

 

 

 

1

 

Net cash provided by financing activities

 

 

6,000

 

 

 

1,264

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(716

)

 

 

(25

)

Increase (decrease) in cash, cash equivalents and restricted cash

 

 

9,891

 

 

 

(9,117

)

Cash, cash equivalents and restricted cash, at beginning of the period

 

 

152,453

 

 

 

119,968

 

Cash, cash equivalents and restricted cash, at end of the period

 

$

162,344

 

 

$

110,851

 

 

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 January 1, 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 January 1, 2021.

The Condensed Consolidated Financial Statements for the three months ended April 2, 2021 and April 3, 2020, 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 2, 2021 and April 3, 2020, 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 was one vendor which accounted for over 11% and 10% of the Company’s consolidated accounts payable as of April 2, 2021 and January 1, 2021, respectively.  There were no vendors who accounted for over 10% of the Company’s consolidated purchases for the three months ended April 2, 2021 and April 3, 2020, respectively.  

Use of Estimates

During the COVID-19 pandemic, the Company believes it has used reasonable estimates and assumptions in determining valuation allowances for uncollectible trade receivables, sales returns reserves, obsolete and excess inventory reserves, deferred income taxes, and tax reserves, including valuation allowances for deferred tax assets, pension liabilities, evaluation of asset impairment, in determining the useful life of depreciable and definite-lived intangible assets, and in the variables and assumptions used to calculate and record stock-based compensation.  Throughout the COVID-19 pandemic the Company offered extended payment terms to assist its surgeon customers and their clinics as they resumed business. Although the Company experienced some delays in payments on accounts receivable as a result of the COVID-19 pandemic in the first half of 2020, the Company experienced improvements since the third quarter of 2020 as elective refractive surgeries resumed.  The Company is unaware of any material impairment of customer receivables.  The Company’s sales representatives throughout the world remain engaged with customers conducting online training and other educational courses which have been very well attended.  This activity has given the Company insight into COVID-19’s impact on customers and potential impairment of receivables.

Recently Adopted Accounting Pronouncements and Recent Accounting Pronouncements Not Yet Adopted

On January 1, 2021 (beginning of fiscal year 2021), the Company adopted Accounting Standards Update (“ASU”) 2019‑12, “Income Taxes (Topic 740):  Simplifying the Accounting for Income Taxes,” which removes the following exceptions:  exception to the incremental approach for intraperiod tax allocation; exception to accounting for basis differences when there are ownership changes in foreign investments; and exception to interim period tax accounting for year to date losses that exceed anticipated losses.  ASU 2019-12 also improves financial reporting for franchise taxes that are partially based on income; transactions with a government that result in a step up in the tax basis of goodwill; separate financial statements of legal entities that are not subject to tax; and enacted changes in tax laws in interim periods.  The adoption of ASU 2019-12 did not have a material impact on the Condensed Consolidated Financial Statements.

6


STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

 

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 2, 2021

 

 

January 1, 2021

 

Raw materials and purchased parts

 

$

3,534

 

 

$

3,679

 

Work in process

 

 

2,272

 

 

 

2,174

 

Finished goods

 

 

12,440

 

 

 

13,717

 

Total inventories, gross

 

 

18,246

 

 

 

19,570

 

Less inventory reserves

 

 

(1,457

)

 

 

(1,459

)

Total inventories, net

 

$

16,789

 

 

$

18,111

 

 

Note 3 — Prepayments, Deposits, and Other Current Assets

Prepayments, deposits, and other current assets consisted of the following (in thousands):

 

 

April 2, 2021

 

 

January 1, 2021

 

Prepayments and deposits

 

$

3,625

 

 

$

3,423

 

Prepaid insurance

 

 

1,980

 

 

 

2,677

 

Prepaid marketing

 

 

1,281

 

 

 

368

 

Consumption tax receivable

 

 

170

 

 

 

1,409

 

Value added tax (VAT) receivable

 

 

1,763

 

 

 

2,056

 

BVG (Swiss Pension) prepayment

 

 

808

 

 

 

2

 

Other(1)

 

 

1,022

 

 

 

690

 

Total prepayments, deposits and other current assets

 

$

10,649

 

 

$

10,625

 

 

(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 2, 2021

 

 

January 1, 2021

 

Machinery and equipment

 

$

21,877

 

 

$

21,209

 

Computer equipment and software

 

 

8,362

 

 

 

7,423

 

Furniture and fixtures

 

 

4,672

 

 

 

4,676

 

Leasehold improvements

 

 

11,404

 

 

 

11,388

 

Construction in process

 

 

12,598

 

 

 

11,120

 

Total property, plant and equipment, gross

 

 

58,913

 

 

 

55,816

 

Less accumulated depreciation

 

 

(32,599

)

 

 

(31,786

)

Total property, plant and equipment, net

 

$

26,314

 

 

$

24,030

 

 

Note 5 –Intangible Assets

Intangible assets, net consisted of the following (in thousands):

 

 

 

April 2, 2021

 

 

January 1, 2021

 

Long-lived amortized intangible assets

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

 

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

 

Patents and licenses

 

$

9,339

 

 

$

(9,090

)

 

$

249

 

 

$

9,382

 

 

$

(9,112

)

 

$

270

 

7


STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

 

 

 

Note 6 – Other Current Liabilities

Other current liabilities consisted of the following (in thousands):

 

 

 

April 2, 2021

 

 

January 1, 2021

 

Accrued salaries and wages

 

$

5,086

 

 

$

6,061

 

Accrued bonuses

 

 

1,896

 

 

 

3,000

 

Accrued insurance

 

 

1,757

 

 

 

2,633

 

Income taxes payable

 

 

5,517

 

 

 

4,657

 

Accrued consumption tax

 

 

520

 

 

 

1,743

 

Marketing obligations

 

 

1,430

 

 

 

1,484

 

Other(1)

 

 

3,709

 

 

 

5,028

 

Total other current liabilities

 

$

19,915

 

 

$

24,606

 

 

(1)

No individual item in “Other” exceeds 5% of the other current liabilities.

Note 7 – Lines of Credit

Since 1998, the Company’s wholly owned Japanese subsidiary, STAAR Japan, has had an agreement with Mizuho Bank which provides for borrowings of up to 500,000,000 Yen, at an interest rate equal to the uncollateralized overnight call rate (approximately 0.07% as of April 2 2021) plus a 0.50% spread, and may be renewed quarterly (the current line expires on May 21, 2021).  The credit facility is not collateralized.  The Company had 142,500,000 Yen outstanding on the line of credit as of April 2, 2021 and January 1, 2021 (approximately $1,288,000 and $1,379,000 based on the foreign exchange rates on April 2, 2021 and January 1, 2021, respectively), which approximates fair value due to the short-term maturity and market interest rates of the line of credit.  In case of default, the interest rate will be increased to 14% per annum.  There was 357,500,000 Yen available for borrowing as of April 2, 2021 and January 1, 2021 (approximately $3,232,000 and $3,459,000 based on the foreign exchange rate on April 2, 2021 and January 1, 2021, respectively).  At maturity on May 21, 2021, the Company expects to renew this line of credit for an additional three months, with similar terms.

In September 2013, the Company’s wholly owned Swiss subsidiary, STAAR Surgical AG, entered into a framework agreement for loans (“framework agreement”) with Credit Suisse (the “Bank”). The framework agreement provides for borrowings of up to 1,000,000 CHF (Swiss Francs) (approximately $1,100,000 at the rate of exchange on April 2, 2021 and January 1, 2021), to be used for working capital purposes. Accrued interest and 0.25% commissions on average outstanding borrowings is payable quarterly and the interest rate will be determined by the Bank based on the then prevailing market conditions at the time of borrowing. The framework agreement is automatically renewed on an annual basis based on the same terms assuming there is no default. The framework agreement may be terminated by either party at any time in accordance with its general terms and conditions. The framework agreement is not collateralized and contains certain conditions such as providing the Bank with audited financial statements annually and notice of significant events or conditions, as defined in the framework agreement. The Bank may also declare all amounts outstanding to be immediately due and payable upon a change of control or a “material qualification” in STAAR Surgical independent auditors’ report, as defined. There were no borrowings outstanding as of April 2, 2021 and January 1, 2021.

The Company is in compliance with covenants of its credit facilities and lines of credit as of April 2, 2021.

8


STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

 

Note 8 – Leases

Finance Leases

The Company entered into finance leases primarily related to purchases of equipment used for manufacturing or computer-related equipment.  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 2, 2021

 

 

January 1, 2021

 

Machinery and equipment

 

$

36

 

 

$

570

 

Computer equipment and software

 

 

659

 

 

 

806

 

Finance lease right-of-use assets, gross

 

 

695

 

 

 

1,376

 

Less accumulated depreciation

 

 

(615

)

 

 

(780

)

Finance lease right-of-use assets, net

 

$

80

 

 

$

596

 

 

 

 

 

 

 

 

 

 

Total finance lease liability

 

$

152

 

 

$

398

 

Weighted-average remaining lease term (in years)

 

 

1.4

 

 

 

0.9

 

Weighted-average discount rate

 

 

2.62

%

 

 

3.46

%

 

Supplemental cash flow information related to finance leases consisted of the following (dollars in thousands):

 

 

 

Three Months Ended

 

 

 

April 2, 2021

 

 

April 3, 2020

 

Amortization of finance lease right-of-use asset

 

$

36

 

 

$

117

 

Interest on finance lease liabilities

 

 

4

 

 

 

10

 

Cash paid for amounts included in the measurement of finance lease liabilities:

 

 

 

 

 

 

 

 

Operating cash flows

 

 

4

 

 

 

10

 

Financing cash flows

 

 

235

 

 

 

236

 

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 did 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 2, 2021

 

 

January 1, 2021

 

Machinery and equipment

 

$

879

 

 

$

860

 

Computer equipment and software

 

 

168

 

 

 

462

 

Real property

 

 

13,460

 

 

 

12,956

 

Operating lease right-of-use assets, gross

 

 

14,507

 

 

 

14,278

 

Less accumulated depreciation

 

 

(5,841

)

 

 

(5,514

)

Operating lease right-of-use assets, net

 

$

8,666

 

 

$

8,764

 

 

 

 

 

 

 

 

 

 

Total operating lease liability

 

$

8,689

 

 

$

9,022

 

Weighted-average remaining lease term (in years)

 

 

5.0

 

 

 

5.2

 

Weighted-average discount rate

 

 

2.73

%

 

 

2.61

%

 

9


STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

 

 

Note 8 – Leases (Continued)

Operating Leases

Supplemental cash flow information related to operating leases was as follows (dollars in thousands):

 

 

 

Three Months Ended

 

 

 

April 2, 2021

 

 

April 3, 2020

 

Operating lease cost

 

$

783

 

 

$

740

 

Cash paid for amounts included in the measurement of operating lease liabilities:

 

 

 

 

 

 

 

 

Operating cash flows