STAAR Surgical(STAA) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The unaudited financial statements reveal a significant sales decline and net loss due to challenges in China and major restructuring charges Condensed Consolidated Balance Sheets The balance sheet shows increased cash but decreased investments and total assets, reflecting a contraction in the company's financial position Condensed Consolidated Balance Sheets (in thousands) | Metric | June 27, 2025 | December 27, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $167,131 | $144,159 | | Investments available for sale | $22,752 | $86,335 | | Accounts receivable trade, net | $34,440 | $77,897 | | Inventories, net | $53,107 | $43,305 | | Total current assets | $292,792 | $367,940 | | Property, plant and equipment, net| $74,417 | $84,889 | | Total assets | $437,781 | $509,524 | | Total current liabilities | $59,228 | $70,306 | | Total liabilities | $101,208 | $112,189 | | Total stockholders' equity | $336,573 | $397,335 | Condensed Consolidated Statements of Operations The income statement highlights a sharp drop in net sales and a shift from operating income to a significant operating loss year-over-year Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $44,320 | $99,005 | $86,909 | $176,361 | | Cost of sales | $11,521 | $20,593 | $26,105 | $36,914 | | Gross profit | $32,799 | $78,412 | $60,804 | $139,447 | | Operating income (loss) | $(29,964) | $11,898 | $(87,365) | $9,617 | | Income (loss) before income taxes | $(25,915) | $10,334 | $(80,401) | $8,123 | | Net income (loss) | $(16,812) | $7,379 | $(71,023) | $4,040 | | Basic EPS | $(0.34) | $0.15 | $(1.44) | $0.08 | | Diluted EPS | $(0.34) | $0.15 | $(1.44) | $0.08 | Condensed Consolidated Statements of Comprehensive Income (Loss) The company experienced a comprehensive loss driven by a net loss, contrasting with comprehensive income in the prior year Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $(16,812) | $7,379 | $(71,023) | $4,040 | | Other comprehensive income (loss), net of tax | $(41) | $(751) | $1,386 | $(1,350) | | Comprehensive income (loss) | $(16,853) | $6,628 | $(69,637) | $2,690 | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity decreased significantly due to a substantial net loss, partially offset by stock-based compensation Changes in Stockholders' Equity (in thousands) | Metric | Balance at Dec 27, 2024 | Net Loss (6 months) | Other Comprehensive Income (6 months) | Stock-based Compensation (6 months) | Repurchase of Common Stock (6 months) | Balance at June 27, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $397,335 | $(71,023) | $1,386 | $14,321 | $(4,479) | $336,573 | Condensed Consolidated Statements of Cash Flows Cash flow from operations turned negative, though the overall cash position increased due to proceeds from investment maturities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(32,983) | $11,267 | | Net cash provided by (used in) investing activities | $60,471 | $(4,481) | | Net cash provided by (used in) financing activities | $(5,488) | $4,219 | | Effect of exchange rate changes | $972 | $(1,267) | | Increase in cash and cash equivalents | $22,972 | $9,738 | | Cash and cash equivalents, at end of the period | $167,131 | $192,776 | Notes to Condensed Consolidated Financial Statements These notes detail accounting policies, restructuring charges, investment changes, and the subsequent merger agreement with Alcon Note 1 — Basis of Presentation and Significant Accounting Policies This note outlines the company's business, basis of financial presentation, and details significant restructuring and impairment charges - The Company designs, develops, manufactures, and sells implantable lenses for the eye and accessory delivery systems[22] - Reclassified certain personnel costs from research and development to sales and marketing to better reflect their nature in supporting existing products[25] Restructuring, Impairment and Related Charges (in thousands) | Charge Type | Three Months Ended June 27, 2025 | Six Months Ended June 27, 2025 | | :--- | :--- | :--- | | Severance and reduction in workforce | $3,645 | $12,453 | | Consulting expenses | $227 | $866 | | Impairment on leasehold improvements and machinery & equipment | $700 | $7,759 | | Impairment on real property right-of-use assets | $676 | $4,083 | | Impairment for internally developed software | $0 | $2,751 | | Total Charges | $5,248 | $27,912 | Note 2 — Investments Available for Sale The company's portfolio of available-for-sale investments decreased substantially, with all remaining investments maturing within one year Investments Available for Sale (in thousands) | Investment Type | June 27, 2025 (Estimated Fair Value) | December 27, 2024 (Estimated Fair Value) | | :--- | :--- | :--- | | Commercial paper | $4,154 | $21,468 | | Certificates of deposit | $1,507 | $1,997 | | U.S. Treasury securities | $999 | $11,355 | | Corporate debt securities | $16,092 | $51,515 | | Total investments AFS | $22,752 | $86,335 | - All investments available for sale as of June 27, 2025, mature within one year[37] - No allowance for expected credit losses was recorded for the three and six months ended June 27, 2025, and June 28, 2024[36] Note 3 — Inventories Net inventories increased, driven by a significant rise in finished goods, particularly consigned inventory Inventories, Net (in thousands) | Inventory Component | June 27, 2025 | December 27, 2024 | | :--- | :--- | :--- | | Raw materials and purchased parts | $10,353 | $9,705 | | Work in process | $10,441 | $8,168 | | Finished goods | $34,368 | $26,710 | | Total inventories, gross | $55,162 | $44,583 | | Less inventory reserves | $(2,055) | $(1,278) | | Total inventories, net | $53,107 | $43,305 | - Finished goods inventory includes consigned inventory of $14,329,000 at June 27, 2025, a significant increase from $1,958,000 at December 27, 2024[39] Note 4 — Prepayments, Deposits, and Other Current Assets Total prepayments and other current assets remained relatively stable, with notable decreases in prepaid rent and insurance Prepayments, Deposits, and Other Current Assets (in thousands) | Asset Component | June 27, 2025 | December 27, 2024 | | :--- | :--- | :--- | | Prepayments and deposits | $8,158 | $7,887 | | Prepaid rent | $170 | $2,910 | | Prepaid insurance | $1,210 | $2,432 | | Value added tax (VAT) receivable | $2,640 | $1,359 | | BVG (Swiss Pension) prepayment | $1,273 | $7 | | Other | $1,911 | $1,649 | | Total | $15,362 | $16,244 | Note 5 — Property, Plant and Equipment Net property, plant, and equipment decreased due to depreciation and significant impairment charges on fixed and software assets Property, Plant and Equipment, Net (in thousands) | Asset Component | June 27, 2025 | December 27, 2024 | | :--- | :--- | :--- | | Machinery and equipment | $43,487 | $46,113 | | Computer equipment and software | $11,315 | $12,976 | | Furniture and fixtures | $7,727 | $7,627 | | Leasehold improvements | $18,671 | $19,766 | | Construction in process | $30,551 | $32,014 | | Total property, plant and equipment, gross | $111,751 | $118,496 | | Less accumulated depreciation | $(37,334) | $(33,607) | | Total property, plant and equipment, net | $74,417 | $84,889 | - Recognized fixed asset impairment expense of $7,759,000 for the six months ended June 27, 2025, primarily on leasehold improvements and machinery[42] - Recognized impairment of $2,751,000 for internally developed software due to a transition to a cloud-based solution[42] Note 6 – Cloud-Based Software The company significantly increased its investment in capitalized cloud-based software assets during the period Capitalized Cloud-Based Software, Net (in thousands) | Metric | June 27, 2025 | December 27, 2024 | | :--- | :--- | :--- | | Capitalized cloud-based software | $22,865 | $15,763 | | Less accumulated amortization | $(200) | $0 | | Total capitalized cloud-based software, net | $22,665 | $15,763 | - Additions to cloud-based software were $7,101,000 for the six months ended June 27, 2025[45] Note 7 – Other Current Liabilities Other current liabilities decreased, though severance payable increased substantially due to restructuring activities Other Current Liabilities (in thousands) | Liability Component | June 27, 2025 | December 27, 2024 | | :--- | :--- | :--- | | Accrued salaries and wages | $13,821 | $16,140 | | Accrued bonuses | $3,354 | $1,300 | | Severance payable | $4,123 | $356 | | Accrued insurance | $1,106 | $2,701 | | Income taxes payable | $1,067 | $6,547 | | Marketing obligations | $3,462 | $2,699 | | Other | $10,121 | $13,344 | | Total other current liabilities | $37,054 | $43,087 | - Recognized $12,453,000 for severance costs related to leadership realignment and workforce reduction for the six months ended June 27, 2025[46] Note 8 – Operating Leases Operating lease liabilities increased slightly, and the company recognized significant impairment on right-of-use assets from exiting properties Operating Lease Right-of-Use Assets and Liabilities (in thousands) | Metric | June 27, 2025 | December 27, 2024 | | :--- | :--- | :--- | | Operating lease right-of-use assets, net | $33,027 | $36,850 | | Current operating lease obligations | $5,103 | $3,894 | | Long-term operating lease obligations | $35,417 | $34,807 | | Total operating lease liability | $40,520 | $38,701 | | Weighted-average remaining lease term (in years) | 6.8 | 7.1 | | Weighted-average discount rate | 6.00% | 5.98% | - Recognized impairment on real property right-of-use assets of $4,083,000 for the six months ended June 27, 2025[47] Note 9 — Income Taxes The company recorded an income tax benefit due to pre-tax losses, with effective tax rates influenced by foreign jurisdiction taxes Income Tax Provision (Benefit) (in thousands) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | | :--- | :--- | :--- | :--- | :--- | | Provision (benefit) for income taxes | $(9,103) | $2,955 | $(9,378) | $4,083 | | Effective tax rate | 35.1% | 28.6% | 11.7% | 50.3% | - Effective tax rates differ from the U.S. federal statutory rate of 21% primarily due to income tax expense generated in foreign jurisdictions[50] Note 10 – Defined Benefit Pension Plans Net periodic pension costs increased compared to the prior year, driven by higher service costs and actuarial losses Net Periodic Pension Cost (in thousands) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | | :--- | :--- | :--- | :--- | :--- | | Service cost | $436 | $313 | $840 | $638 | | Interest cost | $63 | $87 | $125 | $171 | | Expected return on plan assets | $(139) | $(136) | $(274) | $(268) | | Prior service credit | $(53) | $(45) | $(106) | $(90) | | Settlement gain | $(4) | $0 | $(8) | $0 | | Actuarial loss recognized in current period | $73 | $28 | $146 | $56 | | Net periodic pension cost | $376 | $247 | $723 | $507 | Note 11 — Stockholders' Equity The company initiated a share repurchase program and continued to record stock-based compensation expense Stock-Based Compensation Expense (in thousands) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | | :--- | :--- | :--- | :--- | :--- | | Employee stock options | $1,640 | $3,518 | $4,045 | $6,691 | | RSUs | $3,345 | $3,053 | $6,308 | $5,343 | | PSUs | $2,211 | $2,119 | $2,607 | $2,804 | | Total stock-based compensation expense | $7,802 | $9,042 | $13,817 | $15,381 | - The Board of Directors authorized a share repurchase program of up to $30 million in May 2025[60] - During the quarter ended June 27, 2025, the Company purchased 260,515 shares for an aggregate of $4,479,000 under the repurchase program[60] Note 12 - Commitments and Contingencies The company is involved in routine legal matters that are not expected to have a material adverse effect on its financial condition - The Company is involved in various legal proceedings and other matters arising in the normal course of business[62] - Management does not believe that any known claims are likely to have a material adverse effect on the Company's financial condition or results of operations[62] Note 13 — Basic and Diluted Net Income (Loss) Per Share The company reported a net loss per share, and a significant number of potential common shares were excluded as anti-dilutive Basic and Diluted Net Income (Loss) Per Share | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $(16,812) | $7,379 | $(71,023) | $4,040 | | Basic EPS | $(0.34) | $0.15 | $(1.44) | $0.08 | | Diluted EPS | $(0.34) | $0.15 | $(1.44) | $0.08 | - Due to a net loss for the three and six months ended June 27, 2025, the number of diluted shares was equal to the number of basic shares[63] Anti-Dilutive Securities Excluded from Diluted EPS (in thousands) | Security Type | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | | :--- | :--- | :--- | :--- | :--- | | Stock options | 7,128 | 3,031 | 7,089 | 3,275 | | Restricted stock, RSUs and PSUs | 1,009 | 180 | 885 | 63 | | Total Anti-Dilutive Securities | 8,137 | 3,211 | 7,974 | 3,338 | Note 14 — Disaggregation of Sales, Geographic Sales and Product Sales Sales are entirely from ophthalmic surgical products, with a dramatic decline in China sales being the primary driver of the overall revenue drop - 100% of the Company's sales are generated from the ophthalmic surgical product segment, primarily implantable Collamer lenses (ICLs)[65] Net Sales by Category (in thousands) | Sales Category | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | | :--- | :--- | :--- | :--- | :--- | | Non-consignment sales | $37,525 | $94,775 | $75,376 | $166,539 | | Consignment sales | $6,795 | $4,230 | $11,533 | $9,822 | | Total net sales | $44,320 | $99,005 | $86,909 | $176,361 | Net Sales by Geographic Market (in thousands) | Geographic Market | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | | :--- | :--- | :--- | :--- | :--- | | Domestic | $5,635 | $5,399 | $11,094 | $10,334 | | Foreign: China | $5,299 | $63,519 | $4,422 | $101,996 | | Foreign: Japan | $10,915 | $9,887 | $22,310 | $20,344 | | Foreign: Korea | $4,293 | $3,924 | $11,815 | $10,660 | | Foreign: Other | $18,178 | $16,276 | $37,268 | $33,027 | | Total net sales | $44,320 | $99,005 | $86,909 | $176,361 | Note 15 — Geographic Assets The majority of the company's long-lived assets, including property and equipment, are located in the United States Long-Lived Assets by Geographic Location (in thousands) | Asset Category | U.S. (June 27, 2025) | Switzerland (June 27, 2025) | Other (June 27, 2025) | Total (June 27, 2025) | | :--- | :--- | :--- | :--- | :--- | | Property, plant and equipment, net | $57,007 | $16,926 | $484 | $74,417 | | Operating lease ROU assets, net | $23,434 | $5,851 | $3,742 | $33,027 | | Total | $80,441 | $22,777 | $4,226 | $107,444 | Note 16 — Subsequent Events Subsequent to the reporting period, the company entered into a definitive merger agreement to be acquired by Alcon - On August 4, 2025, the Company entered into an Agreement and Plan of Merger with Alcon Research, LLC and Rascasse Merger Sub, Inc[69] - Each share of common stock will be converted into the right to receive $28.00 in cash, without interest, upon the effective time of the Merger[72] - The Merger is subject to stockholder approval, regulatory approvals (including Hart-Scott-Rodino, China, and Japan), and other customary closing conditions[73] - Termination fees include up to $43.4 million payable by the Company to Alcon, and $72.4 million payable by Alcon to the Company under specified circumstances[74] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management discusses a significant sales decline and net loss driven by China market challenges and restructuring, while highlighting mitigation strategies Overview The company designs, develops, and sells proprietary implantable Collamer® lenses (ICLs) for refractive surgery globally - STAAR Surgical Company designs, develops, manufactures, and sells implantable Collamer® lenses (ICLs) for refractive surgery[79] - ICLs are proprietary, foldable, phakic lenses made from Collamer, intended to be permanent but reversible[79] - The company's commercialization strategy focuses on sustainable profitable growth, expanding product availability, and providing surgeon training and education[80] Business Environment and Factors Affecting Comparability Business performance was heavily impacted by elevated distributor inventory in China, prompting a shift to consignment agreements - Net sales decreased by 55% for the three months ended June 27, 2025, primarily due to dynamics in the China business[81] - China distributors held elevated ICL product inventory as of December 27, 2024, leading to minimal China ICL sales in the first half of fiscal 2025[81] - The Company negotiated and implemented consignment agreements with China distributors and is ramping up Swiss production to mitigate tariff exposure[82] - China revenue is expected to normalize in the second half of fiscal 2025, with distributors making smaller purchases aligned to procedural volumes[81][83] Critical Accounting Estimates There have been no significant changes to the company's critical accounting estimates during the reporting period - Management believes there have been no significant changes to the critical accounting estimates disclosed in the Annual Report on Form 10-K for the fiscal year ended December 27, 2024[85] Results of Operations The company's operational results show a significant downturn, with sales and gross profit declining sharply and expenses rising as a percentage of sales Key Financial Metrics as Percentage of Net Sales | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | 100.0% | 100.0% | 100.0% | 100.0% | | Cost of sales | 26.0% | 20.8% | 30.0% | 20.9% | | Gross profit | 74.0% | 79.2% | 70.0% | 79.1% | | General and administrative | 47.3% | 23.9% | 52.3% | 26.6% | | Selling and marketing | 59.3% | 31.3% | 61.2% | 33.8% | | Research and development | 23.2% | 12.0% | 24.9% | 13.2% | | Restructuring, impairment and related charges | 11.8% | 0.0% | 32.1% | 0.0% | | Total selling, general and administrative | 141.6% | 67.2% | 170.5% | 73.6% | | Operating income (loss) | (67.6)% | 12.0% | (100.5)% | 5.5% | | Net income (loss) | (38.0)% | 7.4% | (81.7)% | 2.4% | Net Sales Net sales more than halved, driven by a severe decline in the APAC region, specifically China, while other regions saw modest growth Net Sales (in thousands) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Change (2025 vs. 2024) | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | Change (2025 vs. 2024) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $44,320 | $99,005 | (55.2)% | $86,909 | $176,361 | (50.7)% | - The sales decrease was driven by the Asia Pacific (APAC) region, which decreased 69% for the three months and 66% for the six months[90][91] - The Europe, Middle East and Africa (EMEA) region sales increased 11% for the three months and 14% for the six months[90][91] - The Americas region sales increased 10% for both the three and six months[90][91] Gross Profit Gross profit and margin fell due to lower sales volume, reduced production efficiency, and higher inventory reserves Gross Profit and Gross Margin (in thousands) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Change (2025 vs. 2024) | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | Change (2025 vs. 2024) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Gross profit | $32,799 | $78,412 | (58.2)% | $60,804 | $139,447 | (56.4)% | | Gross margin | 74.0% | 79.2% | | 70.0% | 79.1% | | - Gross profit margin decreased primarily due to decreased sales volume and higher manufacturing costs per unit from lower production volume[92] General and Administrative Expense General and administrative expenses decreased due to lower outside services and compensation costs General and Administrative Expenses (in thousands) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Change (2025 vs. 2024) | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | Change (2025 vs. 2024) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | General and administrative expense | $20,969 | $23,641 | (11.3)% | $45,427 | $46,869 | (3.1)% | - Decrease primarily due to decreased outside services and bonus and stock-based compensation expenses, partially offset by increased salary-related expenses[93] Selling and Marketing Expense Selling and marketing expenses declined as the company reduced advertising and promotional activities Selling and Marketing Expenses (in thousands) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Change (2025 vs. 2024) | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | Change (2025 vs. 2024) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Selling and marketing expense | $26,283 | $31,005 | (15.2)% | $53,228 | $59,663 | (10.8)% | - Decrease primarily due to decreased advertising and promotional activities, partially offset by increased salary-related expenses[94] Research and Development Expense Research and development spending was lower due to reduced stock-based compensation and clinical expenses Research and Development Expenses (in thousands) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Change (2025 vs. 2024) | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | Change (2025 vs. 2024) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Research and development expense | $10,263 | $11,868 | (13.5)% | $21,602 | $23,298 | (7.3)% | - Decrease primarily due to decreased stock-based compensation expenses and reduced clinical expenses associated with U.S. post-approval activities[96] Restructuring, Impairment and Related Charges The company incurred substantial restructuring and impairment charges related to severance, asset write-downs, and consulting fees Restructuring, Impairment and Related Charges (in thousands) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | | :--- | :--- | :--- | :--- | :--- | | Restructuring, impairment and related charges | $5,248 | $0 | $27,912 | $0 | - Charges include $12,453,000 for severance, $7,759,000 for fixed asset impairment, and $4,083,000 for ROU asset impairment for the six months ended June 27, 2025[98] - The restructuring effort was substantially completed as of June 27, 2025[98] Other Income (Expense), Net Other income increased significantly, shifting from an expense to income, primarily due to favorable foreign exchange gains Other Income (Expense), Net (in thousands) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | | :--- | :--- | :--- | :--- | :--- | | Other income (expense), net | $4,049 | $(1,564) | $6,964 | $(1,494) | - The increase in other income (expense), net, was primarily due to higher foreign exchange gains[100] Income Taxes The company recorded an income tax benefit as a result of its pre-tax loss, with the effective rate influenced by foreign taxes Income Tax Provision (Benefit) (in thousands) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | | :--- | :--- | :--- | :--- | :--- | | Income (benefit) tax provision | $(9,103) | $2,955 | $(9,378) | $4,083 | | Effective tax rate | 35.1% | 28.6% | 11.7% | 50.3% | - The effective tax rates differ from the U.S. federal statutory rate of 21% primarily due to income tax expense generated in foreign jurisdictions[102] Liquidity and Capital Resources The company's liquidity position weakened with a decrease in working capital, though cash increased from the maturity of investments - Principal sources of liquidity are cash, cash equivalents, investments, and operating cash flow, believed to be sufficient for at least 12 months[104] Liquidity Position (in thousands) | Metric | June 27, 2025 | December 27, 2024 | Change (2025 vs. 2024) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $167,131 | $144,159 | $22,972 | | Investments available for sale | $22,752 | $86,335 | $(63,583) | | Total | $189,883 | $230,494 | $(40,611) | | Working capital | $233,564 | $297,634 | $(64,070) | - Net cash used in operating activities was $32.98 million for the six months ended June 27, 2025, compared to net cash provided of $11.27 million in the prior year[105] - Net cash provided by investing activities was $60.47 million for the six months ended June 27, 2025, mainly from proceeds from maturities of investments[106] Commitments Certain executive officers have employment agreements with change-in-control and severance provisions - The Company's CEO and certain officers have employment agreements with provisions for compensation upon a 'change in control' or termination 'without cause'[109] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in the company's market risk disclosures since the last annual report - No material changes in the Company's qualitative and quantitative market risk since the disclosure in the Annual Report on Form 10-K for the year ended December 27, 2024[110] ITEM 4. CONTROLS AND PROCEDURES Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 27, 2025[111] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[113] PART II – OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The company is involved in routine legal proceedings not expected to materially impact its financial condition or operations - The Company is involved in various legal proceedings and other matters arising in the normal course of business[114] - Management does not believe that any of the claims known is likely to have a material adverse effect on the Company's financial condition or results of operations[114] ITEM 1A. RISK FACTORS New risks related to the proposed Alcon acquisition include potential business disruption and the uncertainty of the merger's completion - The announcement and pendency of the proposed acquisition by Alcon could adversely impact the Company's business, financial condition, and results of operations[116] - Risks include impairment of ability to attract/retain employees, difficulties maintaining customer/supplier relationships, and diversion of management time[119] - Completion of the Merger is subject to closing conditions, including stockholder and regulatory approvals (Hart-Scott-Rodino, China, Japan)[117][118][120] - If the Merger Agreement is terminated, the Company may be required to pay Alcon a termination fee of up to $43.4 million[122] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The company repurchased 260,515 shares for $4.5 million as part of its $30 million share repurchase program - The Company purchased 260,515 shares for an aggregate of $4.5 million during the quarter ended June 27, 2025[128] - These repurchases were part of a share repurchase program authorized in May 2025 for up to $30 million of outstanding common stock[128] - As of June 27, 2025, approximately $25.5 million remained available for repurchases under the program[128] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the company - Not Applicable[129] ITEM 5. OTHER INFORMATION No directors or officers adopted or terminated Rule 10b5-1 trading plans during the quarter - No director or officer adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the quarter ended June 27, 2025[131] ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q, including the Merger Agreement and required certifications - Exhibit 2.1 is the Agreement and Plan of Merger, dated August 4, 2025, by and among STAAR Surgical Company, Alcon Research, LLC and Rascasse Merger Sub, Inc[132] - Includes certifications pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350[132] - Financial statements from the quarterly report are formatted in Inline Extensible Business Reporting Language (iXBRL)[132] SIGNATURES The report is officially signed by the Chief Financial Officer on behalf of the company - The report was signed by Deborah Andrews, Chief Financial Officer, on August 6, 2025[137]