-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C/t4v+L51dFO0LAsbx8luU1AQR7EKBsow39r0YQlEau8Rt4hYngstOdS2aT3WPC+ yfx8ImrpsLF9X1+uroxlew== /in/edgar/work/20000814/0000891618-00-004384/0000891618-00-004384.txt : 20000921 0000891618-00-004384.hdr.sgml : 20000921 ACCESSION NUMBER: 0000891618-00-004384 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VISX INC CENTRAL INDEX KEY: 0000837991 STANDARD INDUSTRIAL CLASSIFICATION: [3845 ] IRS NUMBER: 061161793 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10694 FILM NUMBER: 699506 BUSINESS ADDRESS: STREET 1: 3400 CENTRAL EXPRESSWAY CITY: SANTA CLARA STATE: CA ZIP: 95051 BUSINESS PHONE: 4087332020 MAIL ADDRESS: STREET 1: VISX INC STREET 2: 3400 CENTRAL EXPRESSWAY CITY: SANTA CLARA STATE: CA ZIP: 95051-0703 FORMER COMPANY: FORMER CONFORMED NAME: TAUNTON TECHNOLOGIES INC DATE OF NAME CHANGE: 19901212 10-Q 1 e10-q.txt FORM 10-Q QUARTERLY PERIOD ENDED JUNE 30,2000 1 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 JUNE 30, 2000 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 --------------------------------- VISX, INCORPORATED (Exact name of registrant as specified in its charter) --------------------------------- DELAWARE 06-1161793 - ------------------------------ ----------------- (State or other Jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) 3400 CENTRAL EXPRESSWAY, SANTA CLARA, CALIFORNIA 95051-0703 ----------------------------------------------------------- (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code): (408) 733-2020 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 [ ] Total number of shares of common stock outstanding as of July 31, 2000: 60,524,854 2 VISX, INCORPORATED TABLE OF CONTENTS
PAGE PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS Condensed Consolidated Interim Balance Sheets as 3 of June 30, 2000 and December 31, 1999 Condensed Consolidated Interim Statements of Operations for the 4 Three Months Ended June 30, 2000 and 1999 and for the Six Months Ended June 30, 2000 and 1999 Condensed Consolidated Interim Statements of Cash Flows for the 5 Six Months Ended June 30, 2000 and 1999 Notes to Condensed Consolidated Interim Financial Statements 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview 9 Results of Operations 9 Liquidity and Capital Resources 10 Business Risks and Fluctuations in Quarterly Results 11 PART II OTHER INFORMATION ITEM 1. Legal Proceedings 12 ITEM 4. Submission of Matters to a Vote of Security Holders 13 ITEM 6. Exhibits and Reports on Form 8-K 14 SIGNATURES 15
Page 2 3 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
June 30, December 31, 2000 1999 --------- --------- (unaudited) CURRENT ASSETS: Cash and cash equivalents............................... $ 17,254 $ 25,842 Short-term investments.................................. 183,713 232,517 Accounts receivable, net of allowance for doubtful accounts of $2,418 and $1,773, respectively........... 45,529 51,254 Inventories............................................. 9,812 10,669 Deferred tax assets and prepaid expenses................ 17,250 29,192 --------- --------- Total current assets................................. 273,558 349,474 PROPERTY AND EQUIPMENT, NET................................ 5,371 5,681 LONG-TERM DEFERRED TAX AND OTHER ASSETS.................... 24,370 7,566 --------- --------- $ 303,299 $ 362,721 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable........................................ $ 5,552 $ 5,156 Accrued liabilities..................................... 40,821 40,772 --------- --------- Total current liabilities............................ 46,373 45,928 --------- --------- STOCKHOLDERS' EQUITY: Common stock: $.01 par value, 180,000,000 shares authorized; 64,990,089 and 64,890,946 shares issued, respectively.. 650 649 Additional paid-in capital............................... 220,732 220,049 Treasury stock, at cost: 4,441,046 and 2,939 shares, respectively........................................... (84,332) (153) Accumulated comprehensive income (loss).................. (1,031) (947) Retained earnings........................................ 120,907 97,195 --------- --------- Total stockholders' equity.......................... 256,926 316,793 --------- --------- $ 303,299 $ 362,721 ========= =========
The accompanying notes are an integral part of these condensed consolidated interim financial statements. Page 3 4 VISX, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three months ended Six months ended June 30, June 30, ------------------------ ------------------------ 2000 1999 2000 1999 --------- --------- --------- --------- (unaudited) REVENUES: System sales ........................... $ 15,322 $ 14,848 $ 35,199 $ 26,762 License, service and other revenues .... 32,683 47,655 76,803 89,690 --------- --------- --------- --------- Total revenues ....................... 48,005 62,503 112,002 116,452 --------- --------- --------- --------- COSTS AND EXPENSES: Cost of revenues ....................... 16,929 12,496 33,898 23,093 Marketing, general and administrative .. 12,596 12,968 27,184 22,061 Research, development and regulatory ... 3,341 3,316 6,851 6,951 --------- --------- --------- --------- Total costs and expenses ............. 32,866 28,780 67,933 52,105 --------- --------- --------- --------- INCOME FROM OPERATIONS .................... 15,139 33,723 44,069 64,347 Interest and other income .............. 3,311 2,532 6,978 4,414 Litigation settlement .................. (11,856) -- (11,856) -- --------- --------- --------- --------- INCOME BEFORE PROVISION FOR INCOME TAXES .. 6,594 36,255 39,191 68,761 Provision for income taxes ............. 2,441 14,729 15,480 27,504 --------- --------- --------- --------- NET INCOME ................................ $ 4,153 $ 21,526 $ 23,711 $ 41,257 ========= ========= ========= ========= EARNINGS PER SHARE Basic .................................. $ 0.07 $ 0.34 $ 0.38 $ 0.66 ========= ========= ========= ========= Diluted ................................ $ 0.07 $ 0.32 $ 0.37 $ 0.61 ========= ========= ========= ========= SHARES USED FOR EARNINGS PER SHARE Basic .................................. 60,725 63,283 62,171 62,711 ========= ========= ========= ========= Diluted ................................ 62,910 68,185 64,587 67,522 ========= ========= ========= =========
The accompanying notes are an integral part of these condensed consolidated interim financial statements. Page 4 5 VISX, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Six months ended June 30, ---------------------- 2000 1999 -------- -------- (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income .................................................... $ 23,711 $ 41,257 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .............................. 1,574 1,435 Increase (decrease) in cash flows from changes in operating assets and liabilities: Accounts receivable ..................................... 5,725 (8,604) Inventories ............................................. 857 (2,256) Deferred tax assets and prepaid expenses ................ 11,942 (5,438) Long-term deferred tax and other assets ................. (16,804) (1,031) Accounts payable ........................................ 396 3,227 Accrued liabilities ..................................... 50 5,687 -------- -------- Net cash provided by operating activities .................. 27,451 34,277 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures .......................................... (1,264) (1,953) Purchase of short-term investments ............................ -- (87,322) Proceeds from maturities of short-term investments ............ 48,721 47,016 -------- -------- Net cash (used in) investing activities .................... 47,457 (42,259) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Exercise of stock options, including income tax benefit ....... 3,126 45,317 Repurchase of common stock .................................... (86,622) (4,210) -------- -------- Net cash provided by (used in) financing activities ........ (83,496) 41,107 -------- -------- Net increase (decrease) in cash and cash equivalents ............. (8,588) 33,125 Cash and cash equivalents, beginning of period ................... 25,842 29,870 -------- -------- Cash and cash equivalents, end of period ......................... $ 17,254 $ 62,995 ======== ========
The accompanying notes are an integral part of these condensed consolidated interim financial statements. Page 5 6 VISX, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED) 1. BASIS OF PRESENTATION: We prepared our Condensed Consolidated Interim Financial Statements in conformity with Securities and Exchange Commission rules and regulations. Accordingly, we condensed or omitted certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles. Please read our 1999 Annual Report and Form 10-K to gain a more complete understanding of these interim financial statements. We included in these interim financial statements all adjustments (consisting primarily only of normal recurring adjustments) necessary to present fairly our results for the interim period. Our interim financial statements have not been audited. 2. EARNINGS PER SHARE: Basic earnings per share ("EPS") equals net income divided by the weighted average number of common shares outstanding. Diluted EPS equals net income divided by the weighted average number of common shares outstanding plus dilutive potential common shares calculated in accordance with the treasury stock method. All amounts in the following table are in thousands, except per share data.
Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------- 2000 1999 2000 1999 ------- ------- ------- ------- NET INCOME ............................................... $ 4,153 $21,526 $23,711 $41,257 ======= ======= ======= ======= BASIC EARNINGS PER SHARE Income available to common shareholders ................. $ 4,153 $21,526 $23,711 $41,257 Weighted average common shares outstanding .............. 60,725 63,283 62,171 62,711 ------- ------- ------- ------- Basic Earnings Per Share ................................ $ 0.07 $ 0.34 $ 0.38 $ 0.66 ======= ======= ======= ======= DILUTED EARNINGS PER SHARE Income available to common shareholders ................. $ 4,153 $21,526 $23,711 $41,257 ------- ------- ------- ------- Weighted average common shares outstanding .............. 60,725 63,283 62,171 62,711 Dilutive potential common shares from stock options ..... 2,185 4,902 2,416 4,811 ------- ------- ------- ------- Weighted average common shares and dilutive potential common shares ........................................ 62,910 68,185 64,587 67,522 ------- ------- ------- ------- Diluted Earnings Per Share .............................. $ 0.07 $ 0.32 $ 0.37 $ 0.61 ======= ======= ======= =======
Options to purchase 2,860,000 shares and 18,000 shares during the three month periods ended June 30, 2000 and 1999, respectively, and 2,585,000 shares and 59,000 shares outstanding during the six month periods ended June 30, 2000 and 1999, respectively, were excluded from the computation of diluted EPS because the options' exercise prices were greater than the average market price of the Company's common stock during these periods. Page 6 7 3. INVENTORIES (in thousands):
June 30, December 31, 2000 1999 ----------- ------------ (unaudited) Raw materials and subassemblies .............. $ 4,878 $ 5,310 Work in process .............................. 3,910 4,756 Finished goods ............................... 1,024 603 ------- ------- Total ...................................... $ 9,812 $10,669 ======= =======
4. COMPREHENSIVE INCOME (in thousands):
Three Months Ended Six Months Ended June 30, June 30, --------------------- ---------------------- 2000 1999 2000 1999 -------- -------- -------- -------- NET INCOME .................................... $ 4,153 $ 21,526 $ 23,711 $ 41,257 OTHER COMPREHENSIVE INCOME Change in unrealized holding gains (losses) on available-for-sale securities ............. 189 (361) (82) (608) Change in accumulated foreign currency translation adjustment .................... 18 (13) (2) (10) -------- -------- -------- -------- COMPREHENSIVE INCOME .......................... $ 4,360 $ 21,152 $ 23,627 $ 40,639 ======== ======== ======== ========
5. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133") which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments imbedded in other contracts, and for hedging activities. It requires that we recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. We are required to adopt SFAS No. 133 in the first quarter of 2001. We do not expect the impact of adopting SFAS No. 133 to have a material effect on our financial position or results of operations. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 ("SAB No. 101"), Revenue Recognition in Financial Statements. It provides guidance on applying generally accepted accounting principles to revenue recognition issues in financial statements. Among other things, SAB No. 101 would result in a change from the established practice in many industries of recognizing revenue at the time of shipment of a system, and instead would delay recognition until the time of installation. A change in revenue recognition reporting practices could have a material affect on revenue in any particular reporting period. We will adopt SAB No. 101 as required by the fourth quarter of 2000 and are evaluating the effect that SAB No. 101 may have on our financial statements. Page 7 8 6. LITIGATION SETTLEMENT On May 4, 2000 we reported the settlement of a number of litigation matters: (1) antitrust and patent claims between VISX and Jon Dishler, et al., (2) the action filed by John Taboada against Stephen Trokel, VISX, et al., and (3) an action filed by a group of former clinical investigators of the system made by Taunton Technologies Corporation. In connection with these settlements, VISX paid a total of $11,856,000 ($0.11 per share, after taxes) in one-time payments and related costs and fees. Page 8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In our Management's Discussion and Analysis of Financial Condition and Results of Operations we review our past performance and, where appropriate, state our expectations about future activity in forward-looking statements. Our future results may differ from our expectations. We have described our business and the challenges and risks we may face in the future in Items 1 and 3 of our 1999 Annual Report and Form 10-K and under "Business Risks and Quarterly Fluctuations" below. Please read these items carefully. OVERVIEW We develop products and procedures to improve people's eyesight using lasers. Our principal product, the VISX STAR S2(TM) Laser System ("VISX System"), is designed to correct the shape of a person's eyes to reduce or eliminate their need for eyeglasses or contact lenses. The Food and Drug Administration ("FDA") has approved the VISX System for use in the treatment of most types of refractive vision disorders including nearsightedness, farsightedness, and astigmatism. We sell VisionKey(R) cards to control the use of the VISX System and to collect license fees for the use of our patents. The laser vision correction industry is evolving rapidly. New developments and changes in market conditions frequently affect VISX and could harm our business in the future. We may face increased competition from manufacturers and users of other laser vision correction systems or new competition from non-laser methods for correcting a person's vision. Patients' and doctors' desire for laser vision correction using VISX Systems may not grow or may decline in the future. Prices for our products and services may change as the result of new developments in our market. Due to adverse determinations in current and future patent and antitrust litigation, damages may be assessed against us and we may not be able to enforce our current patent rights or collect license fees. All of these factors could cause orders and revenues for VISX Systems and VisionKey(R) cards to fluctuate or even decline. Accordingly, our past results may not be useful in predicting our future results. RESULTS OF OPERATIONS
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- -------------------------------- REVENUES (000's) 2000 1999 Change 2000 1999 Change ------- ------- ------ -------- -------- ------ System sales ................... $15,322 $14,848 3% $ 35,199 $ 26,762 32% Percent of total revenues .. 31.9% 23.8% 31.4% 23.0% License, service & other revenues ................... 32,683 47,655 (31)% 76,803 89,690 (14)% Percent of total revenues .. 68.1% 76.2% 68.6% 77.0% Total .......................... $48,005 $62,503 (23)% $112,002 $116,452 (4)%
We sold 81 and 167 laser systems during the second quarter and first six months of 2000, respectively, as compared to 61 and 112 in the comparable periods of the prior year, respectively. In the U.S. we sold 50 laser systems in the second quarter of 2000 as compared to 48 in the comparable period of the prior year. In international markets we sold 31 laser systems in the second quarter of 2000 as compared to 13 in the prior year. This growth in international markets was due to long term development efforts such as hiring new distributors in recent years and expanding market support programs. Average selling prices for our current product during the quarter were lower than in the comparable period of the prior year mainly as the result of our introduction of upcoming new products including our next generation STAR S3(TM) Excimer Laser System and our WaveScan(TM) Wavefront System ("WaveScan"). During the second quarter and first six months of 2000, we shipped 43% and 41% more VisionKey(R) cards in the U.S. for laser vision correction surgery, respectively, than in the Page 9 10 comparable periods of the prior year. We believe that card shipments increased because laser vision correction has grown more popular with consumers. Nevertheless, based on our analysis of sales data and developments in the U.S. laser vision correction market, we concluded in the first quarter that consumer concerns about the pricing of laser vision correction were dampening the industry's potential for growth. In an effort to address these concerns and to help broaden the appeal for laser vision correction, on February 22, 2000 we reduced our U.S. license fee by 60% to $100 per procedure from the $250 fee we had previously charged since we first entered the U.S. market in 1996. This change caused license, service and other revenue to decline from the prior year, despite an increase of more than 40% in the quantity of VisionKey(R) cards shipped in the U.S. While we expect that our license fee reduction will result in a decline in license revenue, as well as total revenue, for the remainder of 2000 as compared to the corresponding periods of 1999, we believe the reduced fee will help promote faster growth of laser vision correction procedures performed using VISX Systems in the U.S. We cannot, however, predict with certainty when or whether growth in procedures will offset the decline in procedure fee, nor even that procedures will increase.
Three Months Ended June 30, Six Months Ended June 30, ----------------------------------- -------------------------------- COSTS & EXPENSES (000's) 2000 1999 Change 2000 1999 Change --------- --------- ----- --------- ------- ------ Cost of revenues ............... $ 16,929 $ 12,496 35% $ 33,898 $23,093 47% Percent of total revenues .. 35.3% 20.0% 30.3% 19.8% Marketing, gen'l and admin ..... 12,596 12,968 (3)% 27,184 22,061 23% Percent of total revenues .. 26.2% 20.7% 24.3% 18.9% R&D and regulatory ............. 3,341 3,316 1% 6,851 6,951 (1)% Percent of total revenues .. 7.0% 5.3% 6.1% 6.0%
Cost of revenues increased in the second quarter and first half of 2000 over the comparable periods of the prior year because we sold more systems and serviced a larger installed base of systems. Our gross profit margin was lower in 2000 than in 1999 due to lower license fees and lower average selling prices of current products as discussed in the section on revenue. Marketing, general and administrative expenses were down slightly in the second quarter though increased for the first six months of 2000 from the comparable periods of the prior year. Legal expenses were lower as settlements were reached and trials completed in several cases. Offsetting the decline in legal expenses, we increased spending on marketing programs targeted towards consumers. In research and development we focused on three areas: new capabilities for the VISX STAR Excimer Laser platform, development of new products such as our WaveScan System, and research into new technologies. We continued to conduct clinical studies and prepare submissions designed to obtain additional approvals from the FDA and regulatory authorities in other countries. Interest income increased because we have generated cash from operations over the past 12 months and have invested this in additional interest bearing securities. We accrued income taxes based on our expected effective income tax rate for all of 2000, net of credits anticipated. LIQUIDITY AND CAPITAL RESOURCES Cash, cash equivalents and short-term investments ("cash") and working capital were as follows.
(000's) June 30, 2000 December 31, 1999 ------------- ----------------- Cash, cash equivalents and short-term investments ... $200,967 $258,359 Working capital ................................ 227,185 303,546
Page 10 11 Cash decreased by $57 million in the first six months of 2000 because the $27 million we generated from operations was more than offset by the $87 million we spent to repurchase 4.5 million shares of VISX stock on the open market. Purchases of short-term investments represent reinvestment of the proceeds from maturities of short-term investments and investment of cash and cash equivalents into short-term investments. We anticipate that our current cash, cash equivalents and short-term investments, as well as anticipated cash flows from operations, will be sufficient to meet our working capital and capital equipment needs at least through the next twelve months. BUSINESS RISKS AND FLUCTUATIONS IN RESULTS Our results of operations have varied widely in the past, and they could continue to vary significantly due to a number of factors, including: - Patients' and doctors' acceptance of laser vision correction as a preferred means of vision correction; - Competition from manufacturers and users of other laser vision correction systems; - Introduction of new methods for vision correction which render our products less competitive or obsolete; - Changes in prices for our products and services as the result of new developments in our markets; - Developments in antitrust litigation to which we are currently a party, including legal actions brought against us by private parties and the legal action pending before the FTC; - Developments in patent litigation that we have initiated, particularly to the extent that adverse developments in these proceedings could limit our ability to collect license fees from sellers and users of laser vision correction equipment; and - Developments in patent litigation in which we are a defendant, particularly to the extent that adverse developments in these proceedings result in damages being assessed against VISX, prevent us from manufacturing or selling our products, or render certain of our patents invalid or unenforceable, which would reduce the scope of proprietary protection available to us and could limit our ability to collect license fees from sellers and users of laser vision correction equipment. We anticipate that our revenue will be significantly lower in 2000 than in 1999 as a result of the new $100 license fee we began charging in February, 2000. In the future, our revenue may fluctuate significantly. Any shortfall in revenues below expectations would likely have an immediate impact on our earnings per share, which could adversely affect the market price of our common stock. Our operating expenses, which include sales and marketing, research and development and general and administrative expenses, are based on our expectations of future revenues and are relatively fixed in the short term. Accordingly, if revenues fall below expectations, we will not be able to reduce our spending rapidly in response to such a shortfall. This will adversely affect our operating results. We devote significant resources to research and development. We anticipate that the resulting new products and capabilities will be well received by customers and generate future revenue, however the actual results may vary from expectations. Due to the foregoing factors, we believe that our results of operations in any given period may not be a good indicator of our future performance. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There were no material changes during the six months ended June 30, 2000 to our exposure to market risk for changes in interest rates and foreign currency exchange rates. Page 11 12 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. VISX is engaged in numerous legal proceedings. Generally, the litigation and other proceedings center on the validity or enforceability of VISX's patents, and on whether infringement of the patents has occurred. In addition, VISX's use of patents and its business practices are being contested in several proceedings as violations of antitrust and similar laws. The results of these complex legal proceedings are very difficult to predict with certainty. Because a number of the proceedings have issues in common, an adverse determination in one proceeding could lead to adverse determinations in one or more of the other pending proceedings. Adverse determinations in any of these proceedings could limit our ability to collect equipment and use fees in certain markets, could give rise to significant monetary damages, could prevent VISX from manufacturing and selling the VISX System, and therefore could have a material, adverse effect on our business, financial position and results of operations. For a complete description of legal proceedings, see VISX's annual report on Form 10-K for the year ended December 31, 1999 and report on Form 10-Q for the quarter ended March 31, 2000. During the quarter ended June 30, 2000, there were no material developments with respect to such previously existing proceedings and no new material proceedings not previously disclosed, except as follows: PATENT LITIGATION: NIDEK On August 8, 2000 Nidek Co. Ltd. ("Nidek") filed an action in Tokyo District Court in Japan against VISX's Japanese subsidiary and others alleging that the defendants infringe Nidek's Japanese Patent No. 2809959 and seeking damages and injunctive relief. VISX will contest the action and plans to initiate proceedings in the Japan Patent Office challenging the validity of Nidek's Japanese Patent No. 2809959. It is too early to predict the outcome of these proceedings. Nidek has also advised VISX that it believes it has certain United States patent rights that are germane to current VISX systems, including a patent that relates to the same technology as the patent dispute in Japan. An adverse determination in any patent infringement action brought by Nidek against VISX could have a material adverse effect on VISX's business, financial position and results of operations. ANTITRUST CLASS ACTIONS Plaintiff in Brisson v. Summit Technology, Inc. et al. ("the Brisson action") brought a purported antitrust class action in state court in Minnesota on behalf of Minnesota patients who underwent laser vision correction and allegedly indirectly paid per procedure license fees to VISX or Summit. Defendants VISX and Summit moved to stay the Brisson action in deference to an earlier-filed multi-state patient class action brought in Santa Clara County, California ("In re PRK"). On June 16, 2000, the judge stayed the proceedings pending the resolution of the In re PRK action. On October 14, 1999, Plaintiffs in the Antitrust Class Actions pending in the Multi-District Litigation in Arizona moved for certification of a nationwide class of direct purchasers who paid per procedure license fees to VISX or Summit. On August 1, 2000, Magistrate Judge Virginia Mathis issued a Report and Recommendation supporting the certification of a nationwide class of direct purchasers who paid a per-use royalty to defendants between September 1995 and the date of trial. Discovery in that case is ongoing and no trial date has yet been set. SHAREHOLDER ACTIONS The U.S. District Court for the Northern District of California has consolidated and appointed a lead plaintiff in the securities class actions filed against VISX and certain of its officers captioned In re VISX, Inc. Securities Litigation C-00-0649-CRB. The lead plaintiff has filed a consolidated amended complaint. On May 30, 2000 VISX filed a demurrer to the derivative action filed in the Superior Court of the State of California, Santa Clara County. RECENT SETTLEMENTS As previously reported in our report on Form 8-K filed on May 4, 2000 and in our report on Form 10-Q for the quarter ended March 31, 2000, VISX settled a number of litigation matters during the second quarter. Among the claims settled were the antitrust and other claims against VISX filed by Jon Dishler, DTC Eye Page 12 13 Surgery Center, Inc., DTC Eye Associates, PC, Laser Institute of the Rockies, LLC, and TELCO The Excimer Laser Company Pty, Ltd. in the U.S. District court for the District of Colorado. The settlement also included a resolution of the claims filed in 1996 by Pillar Point Partners, Summit Partner, Inc. and VISX Partner, Inc. against those same parties. Also settled was the action filed by John Taboada against Stephen Trokel, VISX, and VISX Partner, Inc. in the U.S. District Court for the Western District of Texas (USDC West. Dist. Tex. SA-97-CA-794-FB) seeking, among other things, a declaration that Taboada is the inventor of VISX's U.S. Patent No. 5,108,388 (the "'388 Patent") and a payment of royalties received by VISX for the `388 Patent. In connection with the settlement, the parties have signed and filed with the court a stipulated judgment stating that Dr. Trokel is the sole inventor of the `388 Patent. A stipulated dismissal was also filed in the proceeding initiated by Taboada in U.S. District Court for the District Court of Columbia in which Taboada had sought a stay of the reexemination of the `388 patent currently pending in the U.S. Patent and Trademark Office. VISX also settled an action filed against it by a group of former clinical investigators of the system made by Taunton Technologies Corporation in which the plaintiffs alleged federal antitrust law violations, breach of contract, and unjust enrichment. In connection with these settlements, VISX paid a total of $11,856,000 in one-time payments and related costs and fees. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. a) We held our Annual Meeting of Stockholders on May 19, 2000. b) The stockholders voted as follows on the election of all six members of the Board of Directors. There were no abstentions or non-votes for any nominee and all six were elected as directors.
Name For Against Elizabeth H. Davila 52,621,416 2,911,657 Glendon E. French 52,829,097 2,703,976 John W. Galiardo 52,831,788 2,701,285 Jay T. Holmes 52,645,805 2,887,268 Mark B. Logan 52,598,148 2,934,925 Richard B. Sayford 52,823,998 2,709,075
c) The stockholders voted as follows on a proposal to ratify the adoption of the 2000 Stock Plan.
For Against Abstain NON-VOTES --- ------- ------- 46,005,928 9,325,299 201,845 1
d) The stockholders voted as follows on a proposal to ratify the appointment of Arthur Andersen LLP as auditors of the Company for 2000.
For Against Abstain --- ------- ------- 55,007,302 415,769 110,002
Page 13 14 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. a) Exhibits. Ex. 27 Financial Data Schedule b) Reports on Form 8-K. VISX filed one report on Form 8-K during or after the period covered by this report, as follows: (1) Report on Form 8-K filed on August 4, 2000 under Item 5 (Other Events) for the purpose of reporting that VISX's Board of Directors had adopted a stockholder rights plan. Attached as exhibits to the Form 8-K were a copy of the Rights Agreement dated August 3, 2000 between VISX and Fleet National Bank, as rights agent, and VISX's press release dated July 28, 2000 announcing the adoption of the rights plan. Page 14 15 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 ------------------ (Registrant) August 14, 2000 /s/ Mark B. Logan (Date) -------------------------------- Mark B. Logan Chairman of the Board and Chief Executive Officer August 14, 2000 /s/ Timothy R. Maier (Date) -------------------------------- Timothy R. Maier Executive Vice President and Chief Financial Officer (principal financial officer) August 14, 2000 /s/ Derek A. Bertocci (Date) -------------------------------- Derek A. Bertocci Vice President, Controller (principal accounting officer) Page 15 16 EXHIBIT INDEX
Exhibit No. Description - ----------- ----------- 27 Financial Data Schedule
Page 16 EX-27 2 ex27.txt FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 17,254 183,713 47,947 (2,418) 9,812 273,558 15,526 (10,155) 303,299 46,373 0 0 0 650 256,276 303,299 35,199 112,002 33,898 33,898 0 258 0 39,191 15,480 23,711 0 0 0 23,711 $0.38 $0.37
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