STAAR SURGICAL CO Income Taxes Disclosure
Note 10 — Income Taxes
Provision (benefit) for Income Taxes
Income (loss) from continuing operations before provision (benefit) for income taxes was as follows (in thousands):
|
|
Years Ended |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Domestic |
|
$ |
(63,737 |
) |
|
$ |
(52,859 |
) |
|
$ |
(46,388 |
) |
Foreign |
|
|
(18,526 |
) |
|
|
43,807 |
|
|
|
80,084 |
|
Income (loss) before income taxes |
|
$ |
(82,263 |
) |
|
$ |
(9,052 |
) |
|
$ |
33,696 |
|
The provision (benefit) for income taxes consisted of the following (in thousands):
|
|
Years Ended |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current tax provision: |
|
|
|
|
|
|
|
|
|
|||
U.S. federal |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
State |
|
|
22 |
|
|
|
27 |
|
|
|
21 |
|
Foreign |
|
|
1,079 |
|
|
|
7,539 |
|
|
|
9,064 |
|
Total current provision |
|
|
1,101 |
|
|
|
7,566 |
|
|
|
9,085 |
|
Deferred tax provision (benefit): |
|
|
|
|
|
|
|
|
|
|||
U.S. federal |
|
|
— |
|
|
|
3,738 |
|
|
|
3,306 |
|
State |
|
|
— |
|
|
|
137 |
|
|
|
12 |
|
Foreign |
|
|
(2,916 |
) |
|
|
(285 |
) |
|
|
(54 |
) |
Total deferred provision (benefit) |
|
|
(2,916 |
) |
|
|
3,590 |
|
|
|
3,264 |
|
Provision (benefit) for income taxes |
|
$ |
(1,815 |
) |
|
$ |
11,156 |
|
|
$ |
12,349 |
|
A reconciliation of the statutory U.S. federal tax rate to the Company’s effective tax rate after the adoption of ASU 2023-09 was as follows (dollars in thousands):
|
|
Year Ended |
|
|||||
|
|
2025 |
|
|||||
|
|
Amount |
|
|
Percent |
|
||
US federal statutory tax rate |
|
$ |
(17,275 |
) |
|
|
21.0 |
% |
State and local income taxes, net of federal income tax effect(1) |
|
|
22 |
|
|
|
0.0 |
% |
Foreign tax effects |
|
|
|
|
|
|
||
Switzerland |
|
|
|
|
|
|
||
Statutory tax rate difference between Switzerland and United States |
|
|
1,898 |
|
|
|
(2.3 |
)% |
Other |
|
|
331 |
|
|
|
(0.4 |
)% |
Other foreign jurisdictions |
|
|
460 |
|
|
|
(0.6 |
)% |
Effect of changes in tax laws or rates enacted in the current period |
|
|
— |
|
|
|
0.0 |
% |
Effect of cross-border tax laws |
|
|
587 |
|
|
|
(0.7 |
)% |
Tax credits |
|
|
62 |
|
|
|
(0.1 |
)% |
Changes in valuation allowances |
|
|
7,334 |
|
|
|
(8.9 |
)% |
Nontaxable or nondeductible items |
|
|
|
|
|
|
||
Equity compensation |
|
|
5,259 |
|
|
|
(6.4 |
)% |
Other |
|
|
153 |
|
|
|
(0.2 |
)% |
Changes in unrecognized tax benefits |
|
|
(633 |
) |
|
|
0.8 |
% |
Other adjustments |
|
|
(13 |
) |
|
|
0.0 |
% |
Effective tax rate |
|
$ |
(1,815 |
) |
|
|
2.2 |
% |
Note 10 — Income Taxes (Continued)
Provision for Income Taxes (Continued)
A reconciliation of the statutory U.S. federal tax rate to the Company’s effective tax rate before the adoption of ASU 2023-09 was as follows (dollars in thousands):
|
|
Years Ended |
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
||||||||||
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||
US federal statutory tax rate |
|
$ |
(1,901 |
) |
|
|
21.0 |
% |
|
$ |
7,076 |
|
|
|
21.0 |
% |
State and local income taxes, net of federal income tax effect |
|
|
(330 |
) |
|
|
3.6 |
% |
|
|
440 |
|
|
|
1.3 |
% |
Equity compensation |
|
|
2,237 |
|
|
|
(24.7 |
)% |
|
|
1,035 |
|
|
|
3.1 |
% |
Foreign rate differential |
|
|
(3,902 |
) |
|
|
43.1 |
% |
|
|
(7,611 |
) |
|
|
(22.6 |
)% |
Foreign income inclusion |
|
|
9,659 |
|
|
|
(106.7 |
)% |
|
|
16,922 |
|
|
|
50.2 |
% |
Changes in valuation allowance |
|
|
4,060 |
|
|
|
(44.9 |
)% |
|
|
(4,233 |
) |
|
|
(12.6 |
)% |
Tax credits |
|
|
(277 |
) |
|
|
3.1 |
% |
|
|
(930 |
) |
|
|
(2.8 |
)% |
Return to provision adjustment |
|
|
100 |
|
|
|
(1.1 |
)% |
|
|
(284 |
) |
|
|
(0.8 |
)% |
Changes in unrecognized tax benefits |
|
|
1,450 |
|
|
|
(16.0 |
)% |
|
|
— |
|
|
|
0.0 |
% |
Non-deductible expenses |
|
|
163 |
|
|
|
(1.8 |
)% |
|
|
134 |
|
|
|
0.4 |
% |
Other |
|
|
(103 |
) |
|
|
1.2 |
% |
|
|
(200 |
) |
|
|
(0.6 |
)% |
Total income tax expense |
|
$ |
11,156 |
|
|
|
(123.2 |
)% |
|
$ |
12,349 |
|
|
|
36.6 |
% |
The Company has elected to recognize U.S. taxes on GILTI as a period expense in the year the tax is incurred.
Deferred Tax Assets and Liabilities
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets (liabilities) were as follows (in thousands):
|
|
2025 |
|
|
2024 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Accrued expenses |
|
$ |
3,185 |
|
|
$ |
1,230 |
|
Stock-based compensation |
|
|
5,271 |
|
|
|
6,103 |
|
Operating lease liability |
|
|
6,439 |
|
|
|
6,466 |
|
Net operating loss and other credit carryforwards |
|
|
50,662 |
|
|
|
44,083 |
|
Other deferred tax assets |
|
|
2,305 |
|
|
|
2,776 |
|
Gross deferred tax assets |
|
|
67,862 |
|
|
|
60,658 |
|
Valuation allowance |
|
|
(54,556 |
) |
|
|
(46,804 |
) |
Total deferred tax assets |
|
$ |
13,306 |
|
|
$ |
13,854 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Property, plant, equipment and intangibles |
|
$ |
(4,666 |
) |
|
$ |
(5,976 |
) |
Operating lease ROU assets |
|
|
(4,706 |
) |
|
|
(6,066 |
) |
Foreign taxes |
|
|
(569 |
) |
|
|
(1,321 |
) |
Total deferred tax liabilities |
|
|
(9,941 |
) |
|
|
(13,363 |
) |
Total net deferred tax assets |
|
$ |
3,365 |
|
|
$ |
491 |
|
Note 10 — Income Taxes (Continued)
Deferred Tax Assets and Liabilities (Continued)
The ultimate realization of deferred tax assets is dependent upon future generation of income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers projected future income and tax planning strategies in making this assessment. In addition, management considers all other available positive and negative evidence in its analysis, including existing profits in foreign jurisdictions as well as projected future foreign profits. As of January 2, 2026, the Company determined that it is more likely than not that the deferred tax assets of its foreign subsidiaries will be realized based on projected future taxable income and cumulative income over the most recent three-year period. As of January 2, 2026, the Company has incurred cumulative losses in its U.S. operation over the most recent three-year period. Based on the weight of available positive and negative evidence, management concluded that it is more likely than not that the deferred tax assets related to its U.S. operation will not be realized. Accordingly, the Company has maintained a full valuation allowance against its U.S. deferred tax assets.
The deferred tax asset valuation allowance activity was as follows (in thousands):
|
|
Years Ended |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Balance at beginning of period |
|
$ |
(46,804 |
) |
|
$ |
(42,744 |
) |
|
$ |
(46,977 |
) |
Release (recapture) due to incremental cash tax savings |
|
|
— |
|
|
|
(4,456 |
) |
|
|
(3,318 |
) |
Current year change due to deferred tax asset realization |
|
|
(7,752 |
) |
|
|
396 |
|
|
|
7,551 |
|
Balance at end of period |
|
$ |
(54,556 |
) |
|
$ |
(46,804 |
) |
|
$ |
(42,744 |
) |
As of January 2, 2026, the Company had U.S. net operating loss (“NOL”) carryforwards consisting of the following (in thousands):
|
|
2025 |
|
|
Expiration Date |
|
Pre-2018 federal NOL carryforwards |
|
$ |
41,996 |
|
|
will begin to expire in 2027 |
Post-2018 federal NOL carryforwards |
|
|
124,895 |
|
|
indefinite |
State NOL carryforwards |
|
|
56,265 |
|
|
will begin to expire in 2026 |
As of January 2, 2026, the Company had U.S. tax credit carryforwards consisting of the following (in thousands):
|
|
2025 |
|
|
Expiration Date |
|
Federal credit carryforwards |
|
$ |
1,994 |
|
|
will begin to expire in 2030 |
State research tax credit carryforwards |
|
|
1,012 |
|
|
indefinite |
Federal foreign tax credit carryforwards |
|
|
2,013 |
|
|
will begin to expire in 2028 |
The Company files income tax returns in the U.S. federal, various states and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The following tax years remain subject to examination:
Significant jurisdictions |
|
Open Years |
U.S. Federal |
|
2022 – 2024 |
U.S. States |
|
2021 – 2024 |
Foreign |
|
2021 – 2024 |
In various jurisdictions, years prior to 2021 remain open solely for the purposes of examination of the Company’s NOL and credit carryforwards.
Note 10 — Income Taxes (Continued)
Income Taxes Paid
The income taxes paid, net of refunds received, was as follows (in thousands):
|
|
Year Ended |
|
|
|
|
2025 |
|
|
U.S. federal |
|
$ |
— |
|
State and local |
|
|
25 |
|
Foreign |
|
|
|
|
Switzerland |
|
|
5,104 |
|
Japan |
|
|
1,036 |
|
China |
|
|
1,344 |
|
Other |
|
|
321 |
|
Net income taxes paid |
|
$ |
7,830 |
|
The amount of income taxes paid, net of refunds received, for fiscal years ended 2024 and 2023 were $10,945,000 and $2,759,000, respectively.
Tax Holiday
The Company operates under a tax holiday in Switzerland from 2020 through 2029, which consists of two consecutive five year periods: 2020 – 2024 and 2025 – 2029. The tax holiday is conditional upon the Company meeting specific activity and investment requirements as outlined by the Swiss Tax Authorities. The impact of this tax holiday is as follows (in thousands, except per share amounts):
|
|
Years Ended |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Tax impact related to tax holidays |
|
$ |
(1,894 |
) |
|
$ |
4,466 |
|
|
$ |
8,683 |
|
Impact of tax holidays on diluted earnings (loss) per share |
|
$ |
(0.04 |
) |
|
$ |
0.09 |
|
|
$ |
0.17 |
|
Uncertain Tax Benefits
A reconciliation of the beginning and ending amount of unrecognized tax benefits, exclusive of interest, are included in other current liabilities as income taxes payable, is as follows (in thousands):
|
|
Years Ended |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Balance at beginning of period |
|
$ |
910 |
|
|
$ |
— |
|
Increases (decreases) - tax positions in prior period |
|
|
(220 |
) |
|
|
910 |
|
Increases (decreases) - tax positions in current period |
|
|
— |
|
|
|
— |
|
Cash settlement |
|
|
(690 |
) |
|
|
— |
|
Balance at end of period |
|
$ |
— |
|
|
$ |
910 |
|
Interest expense, included in other current liabilities on the Consolidated Balance Sheet, was $0 and $540,000 for January 2, 2026 and December 27, 2024, respectively. There were no uncertain tax positions in 2023.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 3, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2021 | |
| 2020 | Feb 26, 2020 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Mar 2, 2017 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.