SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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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 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission File Number 1-10694
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VISX, INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 06-1161793
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(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3400 CENTRAL EXPRESSWAY, SANTA CLARA, CALIFORNIA 95051
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE): (408) 733-2020
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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
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Total number of shares of common stock outstanding as of April 30, 1996:
15,258,144.
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VISX, INCORPORATED
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Interim Balance Sheets as
of March 31, 1996 and December 31, 1995 3
Condensed Consolidated Interim Statements of Operations for
the Three Months Ended March 31, 1996 and 1995 4
Condensed Consolidated Interim Statements of Cash Flows for
the Three Months Ended March 31, 1996 and 1995 5
Notes to Condensed Consolidated Interim Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations 7
Liquidity and Capital Resources 8
PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
Page 2
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
VISX, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
March 31, December 31,
1996 1995
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(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 25,209 $ 32,332
Short-term investments 52,922 42,887
Accounts receivable 9,391 6,667
Inventories 7,850 6,742
Prepaid expenses 202 234
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Total current assets 95,574 $ 88,862
Property and equipment, net 2,036 1,565
Other assets 651 651
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$ 98,261 $ 91,078
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,458 $ 2,506
Accrued liabilities 13,491 8,691
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Total current liabilities 16,949 11,197
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Stockholders' equity:
Common stock - $.01 par value, 30,000,000
shares authorized; shares issued March 31,
1996 15,199,953;
December 31, 1995 15,173,855 152 152
Additional paid-in capital 131,443 131,185
Accumulated deficit (50,290) (51,568)
Unrealized holding gain on available-for-sale
securities 7 112
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Total stockholders' equity 81,312 79,881
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$ 98,261 $ 91,078
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
INTERIM BALANCE SHEETS.
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VISX, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three months ended
March 31,
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1996 1995
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(unaudited)
REVENUES:
Product sales $ 9,479 $ --
Product sales to Alcon, a related party -- 1,680
Service and other revenues 2,077 1,011
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Total revenues 11,556 2,691
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COSTS AND EXPENSES:
Cost of revenues 5,772 1,802
Marketing, general and administrative 3,563 2,021
Research, development and regulatory 1,860 2,697
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Total costs and expenses 11,195 6,520
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Income (loss) from operations 361 (3,829)
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Other income 917 234
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Net income (loss) $ 1,278 $ (3,595)
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Earnings (loss) per share $ 0.08 $ (0.32)
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Weighted average number of shares and
equivalents outstanding 16,032 11,280
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS.
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VISX, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Three months ended
March 31,
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1996 1995
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(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $1,278 $(3,595)
Adjustments to reconcile net income (loss) to net cash provided by
(used for) operating activities:
Depreciation and amortization 174 161
CHANGES IN ASSETS AND LIABILITIES:
Increase in accounts receivable (2,724) (205)
Decrease in accounts receivable from Alcon, a related party -- 381
Increase in inventories (1,108) (395)
Decrease (increase) in prepaid expenses 32 (7)
Decrease in other assets -- 213
Increase in accounts payable 952 203
Increase (decrease) in accrued liabilities 4,800 (31)
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Net cash provided by (used for) operating activities 3,404 (3,275)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (645) (43)
Purchase of short-term investments (12,263) --
Proceeds from maturities of short-term investments 2,123 --
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Net cash used in investing activities (10,785) (43)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 258 13,971
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Net increase (decrease) in cash and cash equivalents (7,123) 10,653
Cash and cash equivalents, beginning of period 32,332 11,161
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Cash and cash equivalents, end of period $25,209 $21,814
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS.
Page 5
VISX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
The accompanying interim financial statements and related notes should be read
in conjunction with the financial statements and related notes included in the
Company's 1995 Annual Report and Form 10-K.
1. BASIS OF PRESENTATION:
The Condensed Consolidated Interim Financial Statements included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. These Condensed Consolidated
Interim Financial Statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
The Condensed Consolidated Interim Financial Statements included herein reflect,
in the opinion of management, all adjustments (consisting primarily only of
normal recurring adjustments) necessary to present fairly the results for the
interim period. The results of operations for the three months ended March 31,
1996 are not necessarily indicative of results to be expected for the entire
year ending December 31, 1996.
2. PILLAR POINT PARTNERS ROYALTIES:
The Company received its first report of royalty distribution from Pillar Point
Partners in the first quarter of 1996. The Company records a royalty payable to
Pillar Point Partners when VISX systems and VisionKey cards are sold in the
United States. The Company records royalty revenue as service and other revenues
when Pillar Point Partners reports the amount of royalty distribution, net of
expenses, due the Company.
3. EARNINGS (LOSS) PER SHARE:
Earnings per share was computed based on the weighted average number of common
and common equivalent shares outstanding during 1996. Common share equivalents
were calculated using the treasury stock method, and represent dilutive shares
issuable upon the exercise of stock options.
Net loss per share was computed based on the weighted average number of common
shares outstanding during 1995. Common equivalent shares were excluded from the
computation since their effect would be to reduce the net loss per share amount.
4. INVENTORIES (in thousands):
March 31, December 31,
1996 1995
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Raw materials and subassemblies $ 3,062 $ 2,878
Work in process 2,109 1,348
Finished goods 2,679 2,516
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Total $ 7,850 $ 6,742
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks and
uncertainties. The Company's actual results of operations could differ
materially from those anticipated in such forward-looking statements as a result
of certain factors, including those factors set forth below and described in
greater detail in the Company's 1995 Annual Report and Form 10-K. The
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company's 1995 Annual Report and Form 10-K.
OVERVIEW
Since its inception, VISX has been engaged in the design and development of
proprietary technologies and systems for laser vision correction ("LVC") and has
been manufacturing such systems since 1987. In March 1995, the Company
introduced a new, streamlined model of the VISX System. The FDA approved
applications for use of the VISX System for PTK on September 29, 1995 and for
PRK treatment of low to moderate myopia on March 26, 1996.
Notwithstanding approval by the FDA and increases in sales, the Company's future
growth and profitability cannot be predicted with certainty and will be
influenced by a variety of factors. These include the extent to which LVC is
broadly accepted in the United States and key international markets targeted by
the Company, the degree to which Pillar Point Partners is successful in
generating royalty income from patent rights and defending against legal
challenges relating to its structure and operation, developments in patent
litigation both in support of the Company's patents and in defense of claims of
infringement such as the Azema patent suit brought against the Company by Summit
Technology, and competition from other vision correction products and procedures
which are currently in use or may be developed in the future.
RESULTS OF OPERATIONS
THREE MONTH PERIODS ENDED MARCH 31, 1996 AND 1995
Product sales increased 464% in the quarter ended March 31, 1996 over the
comparable period in 1995 due to the FDA's approval of the Company's PMA
application for use of the VISX System (for PTK on September 29, 1995 and for
PRK treatment of low to moderate myopia on March 26, 1996). This allowed the
Company to sell VISX Systems in the United States, which generated an increase
in unit sales compared to the prior year. In addition, average selling prices
were higher in 1996 because the Company was selling through its own direct sales
force in the United States, as contrasted to 1995 when the Company was only
selling outside the United States at lower prices through its distributor,
Alcon.
Until May 26, 1995, Alcon was a related party to the Company by virtue of its
representation on the Company's board of directors. Alcon's representatives did
not stand for reelection at the Company's 1995 stockholders' meeting.
Accordingly, Alcon was no longer considered a related party after that point.
Certain portions of the derivative litigation brought by stockholders of the
Company relate to Alcon's marketing of the VISX System. On January 9, 1996 the
California Superior Court approved a settlement reached by Alcon, VISX and the
other participants in VISX's stockholder derivative litigation pursuant to
which, among other things, the domestic and international marketing agreement
between VISX and Alcon was terminated. This settlement became effective on March
12, 1996.
Page 7
Service and other revenues increased 105% in the quarter ended March 31, 1996
over the comparable period in 1995 due to the continued growth in the installed
base of VISX Systems, royalty license revenue and Pillar Point Partners royalty
revenue.
The gross profit margin increased to 50.1% in the quarter ended March 31, 1996
from 33.0% in the comparable period in 1995 mainly as the result of higher
average selling prices and lower overhead cost per unit due to increased
production. Higher royalty revenues also contributed to the increase in gross
profit margin as there are no costs associated with these revenues.
Marketing, general and administrative expenses increased by 76% in the quarter
ended March 31, 1996 over the comparable period in 1995 due mainly to two
factors. The Company created its own direct sales force to replace Alcon and
incurred costs preparing to directly market the VISX System for LVC. Legal
expenses were higher than in the prior year due to litigation and other matters
primarily related to the Company's patents.
Research, development and regulatory costs were down 31% in the quarter ended
March 31, 1996 over the comparable period in 1995 when the Company incurred
incremental costs for staff, consultants and other regulatory expenses necessary
to pursue PMA applications filed with the FDA.
Other income increased 292% in the quarter ended March 31, 1996 over the
comparable period in 1995 due to higher interest income generated by funds
raised in the November 1995 common stock offering.
LIQUIDITY AND CAPITAL RESOURCES
Additional inventories were purchased in preparation for an anticipated increase
in sales resulting from FDA approval of the VISX System for PRK treatment of low
to moderate myopia. Higher sales in the quarter contributed to the increase in
accounts receivable. Cash received as deposits accompanying orders for VISX
Systems, recorded as accrued liabilities, more than offset increases in
inventories and accounts receivable. Purchases of short-term investments reflect
reinvestment of the proceeds from maturities of short-term investments and
investment of cash and cash equivalents in short-term investments.
The Company anticipates that its current cash, cash equivalents and short-term
investments, as well as anticipated cash flows from operations, will be
sufficient to cover working capital and capital equipment needs through the end
of 1997. The Company may, however, seek to raise additional capital during this
time frame and any such additional capital may not be available on satisfactory
terms.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) EXHIBITS.
Ex. 27 Financial Data Schedule
b) REPORTS ON FORM 8-K.
None
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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.
VISX, Incorporated
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(REGISTRANT)
May 15 , 1996 /s/Mark B. Logan
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(Date) Mark B. Logan
Chairman of the Board and
Chief Executive Officer
May 15 , 1996 /s/Timothy R. Maier
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(Date) Timothy R. Maier
Vice President and
Chief Financial Officer (PRINCIPAL
FINANCIAL AND ACCOUNTING OFFICER)
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