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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 MARCH 31, 1999
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 April 30, 1999 (after
giving effect for the stock split to be issued on or about May 12, 1999):
63,205,400
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VISX, INCORPORATED
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Interim Balance Sheets as 3
of March 31, 1999 and December 31, 1998
Condensed Consolidated Interim Statements of Operations for the 4
Three Months Ended March 31, 1999 and 1998
Condensed Consolidated Interim Statements of Cash Flows for the 5
Three Months Ended March 31, 1999 and 1998
Notes to Condensed Consolidated Interim Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview 8
Results of Operations 8
Liquidity and Capital Resources 9
Year 2000 Disclosure 10
Business Risks and Fluctuations in Quarterly Results 11
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings 12
ITEM 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
</TABLE>
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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
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- -----------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................ $ 43,462 $ 29,870
Short-term investments ............................... 108,763 86,669
Accounts receivable, net of allowance for doubtful
accounts of $1,658 and $1,620, respectively ........ 30,872 27,822
Inventories .......................................... 8,219 6,820
Deferred tax assets and prepaid expenses.............. 14,908 15,457
--------- ---------
Total current assets .............................. 206,224 166,638
PROPERTY AND EQUIPMENT, NET ............................. 5,072 4,318
OTHER ASSETS ............................................ 5,744 5,663
--------- ---------
$ 217,040 $ 176,619
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ..................................... $ 7,565 $ 3,682
Accrued liabilities .................................. 33,621 33,948
--------- ---------
Total current liabilities ......................... 41,186 37,630
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock: $.01 par value, 90,000,000 shares
authorized; 62,759,658 and 62,070,032 shares issued 628 621
Additional paid-in capital ........................... 150,006 137,334
Treasury stock, at cost: 0 and 471,928 shares, ...... -- (4,581)
respectively
Accumulated comprehensive income ..................... 62 188
Retained earnings .................................... 25,158 5,427
--------- ---------
Total stockholders' equity ....................... 175,854 138,989
--------- ---------
$ 217,040 $ 176,619
========= =========
</TABLE>
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 OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------
1999 1998
------- -------
(unaudited)
<S> <C> <C>
REVENUES:
System sales ........................ $11,914 $ 7,560
License, service and other revenues . 42,035 16,750
------- -------
Total revenues .................... 53,949 24,310
------- -------
COSTS AND EXPENSES:
Cost of revenues .................... 10,597 5,830
Marketing, general and administrative 9,093 5,698
Research, development and regulatory 3,635 2,411
------- -------
Total costs and expenses .......... 23,325 13,939
------- -------
INCOME FROM OPERATIONS ................. 30,624 10,371
Interest and other income ........... 1,882 1,421
------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES 32,506 11,792
Provision for income taxes .......... 12,775 2,830
------- -------
NET INCOME ............................. $19,731 $ 8,962
======= =======
EARNINGS PER SHARE
Basic ............................... $ 0.32 $ 0.15
======= =======
Diluted ............................. $ 0.29 $ 0.14
======= =======
SHARES USED FOR EARNINGS PER SHARE
Basic ............................... 62,135 60,865
======= =======
Diluted ............................. 68,329 62,231
======= =======
</TABLE>
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)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------------
1999 1998
-------- --------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 19,731 $ 8,962
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization .......................... 708 476
Increase (decrease) in cash flows from changes in
operating assets and liabilities:
Accounts receivable ................................. (3,050) 1,624
Inventories ......................................... (1,399) (957)
Deferred tax assets and prepaid expenses............. 549 (406)
Other assets ........................................ (260) (1,840)
Accounts payable .................................... 3,883 971
Accrued liabilities ................................. (327) 3,285
-------- --------
Net cash provided by operating activities .............. 19,835 12,115
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ...................................... (1,283) (266)
Purchase of short-term investments ........................ (44,743) (81,903)
Proceeds from maturities of short-term investments ........ 22,520 94,090
-------- --------
Net cash provided by (used in) investing activities .... (23,506) 11,921
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options, including income tax benefit ... 18,220 370
Repurchase of common stock ................................ (957) (6,432)
-------- --------
Net cash provided by (used in) financing activities .... 17,263 (6,062)
-------- --------
Net increase in cash and cash equivalents .................... 13,592 17,974
Cash and cash equivalents, beginning of period ............... 29,870 29,952
-------- --------
Cash and cash equivalents, end of period ..................... $ 43,462 $ 47,926
======== ========
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated interim financial statements.
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VISX, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
MARCH 31, 1999
(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 1998 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
necessary (consisting primarily only of normal recurring adjustments) to present
fairly our results for the interim period. These 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.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1999 1998
------- -------
<S> <C> <C>
NET INCOME ........................................... $19,731 $ 8,962
======= =======
BASIC EPS
Income available to common shareholders ............. $19,731 $ 8,962
Weighted average common shares outstanding .......... 62,135 60,865
------- -------
Basic EPS ........................................... $ 0.32 $ 0.15
======= =======
DILUTED EPS
Income available to common shareholders ............. $19,731 $ 8,962
------- -------
Weighted average common shares outstanding .......... 62,135 60,865
Dilutive potential common shares from stock options . 6,194 1,366
------- -------
Weighted average common shares and dilutive potential 68,329 62,231
common shares
------- -------
Diluted EPS ......................................... $ 0.29 $ 0.14
======= =======
</TABLE>
Options to purchase 2,000 shares and 2,680,000 shares outstanding during
the three month periods ended March 31, 1999 and 1998, 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.
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3. INVENTORIES (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
(unaudited)
<S> <C> <C>
Raw materials and subassemblies $4,062 $3,183
Work in process ............... 3,427 2,869
Finished goods ................ 730 768
------ ------
Total ....................... $8,219 $6,820
====== ======
</TABLE>
4. COMPREHENSIVE INCOME (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
NET INCOME .................................... $ 19,731 $ 8,962
OTHER COMPREHENSIVE INCOME
Change in unrealized holding gains (losses) on (129) (43)
available-for-sale securities
Change in accumulated foreign currency ....... 3 --
translation adjustment
-------- --------
COMPREHENSIVE INCOME .......................... $ 19,605 $ 8,919
======== ========
</TABLE>
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 2000. We do not
expect the impact of adopting SFAS No. 133 to have a material effect on our
financial position or results of operations.
6. STOCK SPLITS
On April 14, 1999 our Board of Directors approved a two-for-one stock
split (in the form of a 100% stock dividend) to shareholders of record on April
27, 1999 which will be issued on or about May 12, 1999. On December 17, 1998 our
Board of Directors approved a two-for-one stock split (in the form of a 100%
stock dividend) to shareholders of record on December 28, 1998 which was issued
on January 13, 1999. We have adjusted all references to share and per share data
for all periods presented to give effect for both of these stock splits.
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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
1998 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 with
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 vision problems 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 proprietary technology.
The laser vision correction industry is new and evolving rapidly. New
developments could harm our business in the future. We may face increased
competition from manufacturers of other laser vision correction systems (several
have now received FDA approval) or new competition from non-laser methods for
correcting a person's vision. Further, patients' and doctors' enthusiasm for
laser vision correction may decline in the future. In addition, we may not be
able to enforce our current patent rights or collect license fees due to adverse
determinations in current and future patent and antitrust litigation. All of
these factors may cause orders for VISX Systems and VisionKey(R) cards to
fluctuate. Accordingly, our past results may not be useful in predicting our
future results.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------
REVENUES 1999 1998 Change
- -------- ------- ------- -------
<S> <C> <C> <C>
System sales ........................ $11,914 $ 7,560 58%
Percent of total revenues 22.1% 31.1%
License, service & other revenues.... 42,035 16,750 151%
Percent of total revenues 77.9% 68.9%
Total ............................... $53,949 $24,310 122%
</TABLE>
We sold substantially more VISX Systems in the first quarter of 1999
than in the comparable period of 1998, in both the United States and
international markets. The average selling price of systems declined in the
United States because we expanded our sales programs to meet the needs of a
greater variety of customers. These programs included allowances for the
trade-in of a competitor's laser, discounts for a second laser at an existing
location, and volume purchase incentives. The average selling price of a system
remained steady in our international markets.
License fees from procedures in the United States generated most of the
increase in license, service and other revenues in 1999 over 1998. We believe
these procedures increased because laser vision correction has become
increasingly well known and popular among consumers. To accommodate this
additional demand, system sales have grown since the beginning of 1998,
increasing the number of VISX Systems in use in 1999. In addition, each VISX
System has been used to perform more procedures on average in 1999 than in 1998.
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<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
COSTS & EXPENSES 1999 1998 Change
- ---------------- --------- -------- ------
<S> <C> <C> <C>
Cost of revenues ............ $10,597 $5,830 82%
Percent of total revenues 19.6% 24.0%
Marketing, gen'l and admin .. 9,093 5,698 60%
Percent of total revenues 16.9% 23.4%
R&D and regulatory .......... 3,635 2,411 51%
Percent of total revenues 6.7% 9.9%
</TABLE>
Cost of revenues increased in 1999 over the prior year because we sold
more systems and serviced a larger installed base of systems. Marketing, general
and administrative expenses increased in several areas in 1999 over the prior
year. We began preparations to launch our consumer marketing program and also
increased spending on marketing programs directed towards eye care
professionals. We also continued to incur expenses on patent lawsuits and in
defending the company in the FTC administrative action. In research and
development, our efforts were directed mainly at developing new capabilities for
current and planned new products. We continued to conduct clinical studies and
prepare submissions designed to obtain additional approvals from the FDA and
regulatory authorities in other countries. We anticipate that research,
development and regulatory expenses could increase to $16 million for the year
1999.
Interest income increased because we have continued to generate cash
from operations and have invested this in additional interest bearing
securities.
We have accrued income taxes based on our expected effective income tax
rate for all of 1999, net of credits anticipated.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and short-term investments ("cash") and working
capital were as follows.
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-------- -----------
<S> <C> <C>
Cash, cash equivalents and short-term investments . $152,225 $116,539
Working capital ................................... 165,038 129,008
</TABLE>
Cash increased $35,686,000 due mainly to net income and the exercise of
stock options. Approximately $5 million was generated from the exercise of stock
options. In addition, our income tax payments have been reduced by approximately
$12 million in the first quarter of 1999 as the result of tax deductions arising
from exercises of non-qualified stock options and disqualifying dispositions of
stock purchased under incentive stock options. This amount was credited directly
to additional paid in capital.
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.
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 meet its working capital and capital equipment needs at least
through the next twelve months.
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YEAR 2000 DISCLOSURE
We are aware that some information technology ("IT") systems may not
function properly at the onset of the year 2000. These systems record only the
last two digits of a date's year instead of the full four digits. For example,
they would record "00" as the year for dates in both 1900 and 2000. This could
cause such systems to process and record information incorrectly or possibly
fail to function in the year 2000.
State of Readiness
Our products, operations, customers, suppliers and service providers all
rely on IT systems, both hardware and software, to function properly. They
include readily apparent systems such as those controlling our VISX Systems as
well as less obvious ones such as those imbedded in the security apparatus that
protects our main facility.
Products: We evaluated the performance of the STAR S2(TM), STAR(TM), and
2020B(TM) Excimer Laser Systems and concluded that none has any problems related
to system performance, safety, efficacy, or printer equipment interface as a
result of handling dates in the year 2000 or beyond. We have determined,
however, that these laser systems do not properly print or store patient report
dates for procedures performed in the year 2000 or beyond. We have developed and
are validating a solution for the STAR S2(TM) and STAR(TM) Excimer Laser
Systems. We are developing a solution for the 2020B(TM) Excimer Laser System. We
expect to have both of these solutions available to customers by approximately
the middle of 1999.
Suppliers: We have sent a survey to all of our suppliers inquiring about
the ability of their systems and products to properly handle dates for the year
2000 and beyond. We have received responses from approximately a third of our
suppliers and, in general, they have or expect to have implemented any upgrades
and fixes necessary to their systems and products. We will follow up on vendors
who have not returned their surveys or who do not anticipate having solutions in
place before 2000. If suppliers do not reply or cannot comply, we may need to
locate alternative sources for critical parts and services. We anticipate that
we will be able to locate and contract with alternative suppliers if necessary.
Operations: We have installed a back-up set of equipment to test and
verify year 2000 compliance. We expect to complete testing of the major elements
of our internal IT systems listed below by the end of the second quarter of
1999.
o LAN and WAN infrastructure which is used to link users and
internal and external systems and networks
o Desktop and laptop computers and related software
o PBX, voicemail, and fax systems
We have determined from vendors of each of the major elements of these
systems what changes, if any, are necessary to make their products year 2000
compliant. We plan to install and test any necessary upgrades and new equipment
and software by the end of the third quarter of 1999.
We use our enterprise resource planning ("ERP") system to help manage
manufacturing, sales, customer service, accounting activities and prepare
financial reports. Based on representations from
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vendors, all elements of our current ERP system are year 2000 compliant except
for our database software. An upgrade to our database software is available
which is year 2000 compliant. We intend to test and implement this along with
other upgrades to our ERP system in the third quarter of 1999.
With regard to our facility, we have asked key suppliers to represent
whether their products and services will function properly when handling dates
for the year 2000 and beyond. These requests cover systems for building
security, heating, and lighting controls.
Costs to Address Year 2000 Issues
We have spent no more than $600,000 to date identifying, developing and
testing solutions to year 2000 issues. We estimate that we will spend
approximately an additional $650,000 to complete testing and implementation of
upgrades and new equipment to make all major internal systems and our products'
systems capable of properly handling dates in the year 2000 and beyond. However,
we may spend more money than we have estimated and this could have a material
adverse effect on our results of operations and financial condition.
Contingency Plans
When we complete our internal reviews and external surveys we will
prepare contingency plans to prepare for problems that we believe are reasonably
likely to arise. However, despite our best efforts, we may not anticipate all
problems that may ultimately arise.
Risks of Year 2000 Issues
We will continue preparations with the goal of ensuring that our
products, operations and suppliers will recognize dates and function properly in
the year 2000 and beyond. However, unanticipated problems could affect the
operation of our products, interrupt or prevent deliveries from suppliers, or
disrupt our delivery of service or VisionKey(R) cards to our customers at the
onset of the year 2000. As a result, we could suffer a material adverse impact
to our business, financial position and results of operation due to a loss of
revenue, legal claims or extra expenses caused by unanticipated year 2000
computer problems.
BUSINESS RISKS AND FLUCTUATIONS IN QUARTERLY RESULTS
Our results of operations have varied widely in the past, and they
could continue to vary significantly from quarter to quarter due to a number of
factors, including:
o Public and market acceptance of laser vision correction as a
preferred means of vision correction;
o Developments in antitrust litigation to which we are currently a
party, including legal actions brought against us by private
parties and legal actions pending before the FTC;
o Developments in patent litigation that we have initiated against
certain of our competitors, 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;
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o Developments in patent litigation in which we are a defendant,
particularly to the extent that adverse developments in these
proceedings 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, which could have a material adverse effect
on our business, financial condition and results of operations;
o The receipt by additional competitors of FDA approval to market
laser vision correction systems in the United States,
particularly to the extent that such competitors do not obtain
licenses under VISX's patents;
o The proliferation of unapproved lasers which are used to perform
laser vision correction as well as any increase in the number of
physician investigational device exemptions issued by the FDA
for laser vision correction equipment; and
o The introduction of new methods for vision correction which
render our products less competitive or obsolete.
Please also read Items 1 and 3 in our 1998 Annual Report and Form 10-K
where we have described our business and the challenges and risks we may face in
the future.
Our revenue growth rates may not be sustainable. Any shortfall in
revenues, particularly in license fees, would 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 our expectations, we will not be able to
reduce our spending rapidly in response to such a shortfall. This will adversely
affect our operating results. Due to the foregoing factors, we believe that
quarter-to-quarter comparisons of our results of operations are not a good
indication of our future performance.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no material changes during the three months ended March 31,
1999 to our exposure to market risk for changes in interest rates and foreign
currency exchange rates.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The patents owned by VISX are being challenged on several fronts.
Generally, the litigation and other proceedings center on the validity or
enforceability of the 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 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 and could have a material, adverse effect on our
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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, 1998. During the quarter ended March 31, 1999, there
were no material developments with respect to such previously existing
proceedings and no new material proceedings not previously disclosed, except as
follows:
ANTITRUST CLASS ACTIONS
In the consolidated antitrust class action filed in California state
court against VISX and other parties on behalf of a purported class of patients
captioned In re PRK, the court on May 12, 1999 entered a conditional order to
which the parties had stipulated certifying that the class shall include
patients in 17 states and the District of Columbia.
In early May 1999, two additional antitrust actions were filed in
Minnesota state court on behalf of purported classes of patients captioned
Castino v. VISX, Inc. and Summit Technology, Inc. and Brisson v. Summit
Technology, Inc., VISX, Inc. Summit Partner, Inc., VISX Partner, Inc. and
Pillar Point Partners. The Castino case was filed on behalf of a purported
class of patients in several states alleging violations of the antitrust and
unfair competition laws of those states. The Brisson case was filed on behalf
of a purported class of Minnesota patients alleging violations of Minnesota
antitrust laws. In each of these cases the plaintiffs are seeking unspecified
damages and injunctive relief. These actions have just been filed and it is too
early to estimate their outcome.
The action on behalf of a purported class of patients captioned Karen
Frankson et al. v. Pillar Point Partners et al., filed on January 4, 1999 in
Wisconsin state court, has been transferred to the Multi- District Litigation
pending in Arizona under the caption The Antitrust Class Actions (USDC AZ Oct.
21, 1998).
PATENT LITIGATION: NIDEK
United States.
The International Trade Commission (ITC) has set a trial date of August
18, 1999 in its investigation of Nidek and its United States subsidiaries based
on the complaint filed with the ITC by VISX on January 22, 1999 (Investigation
No. 337-TA-419). The trial is expected to last approximately 10 days. Assuming
there are no changes to the trial schedule, the ITC administrative law judge is
expected to issue her initial determination by December 1, 1999. The final
determination of the ITC is expected to be made no later than March 1, 2000. The
ITC determination is subject to Presidential Review and may be appealed to the
Federal Circuit Court of Appeals. While we believe that the patents asserted
against Nidek in this action are infringed by the Nidek laser vision correction
system and are valid and enforceable and we will vigorously defend Nidek's
claims to the contrary, there can be no assurance as to the outcome of this
case.
The action filed by VISX against Nidek in the United States District
Court in Northern California on December 18, 1998 (USDC ND Cal C98-04842)
alleging, among other things, that Nidek's laser vision correction systems
infringe certain VISX patents has been stayed pending the outcome of the ITC
proceeding described above.
On March 30, 1999 Nidek filed a lawsuit against VISX alleging, among
other things, that VISX's use of patents allegedly obtained though inequitable
conduct violates certain antitrust laws. (USDC ND Cal VISX). Nidek is seeking an
unspecified amount in damages and injunctive relief. Although we believe that we
have meritorious defenses to the claims presented in this action and we intend
to defend it vigorously, it is too early to estimate the outcome of this action.
An adverse determination could give rise to significant monetary damages and
could limit VISX's ability to collect license fees which, in turn, could have a
material adverse effect on VISX's future results of operations.
Canada
A trial date of September 20, 1999 has been set in the patent
infringement lawsuit filed by VISX against Nidek and certain of its customers in
Canada (Court File No. T-195-94). The defendants have contested VISX's
infringement claims as well as the validity of VISX's patents. Although it is
not possible to predict the outcome of this case, VISX believes it has
meritorious claims and intends to vigorously enforce its patents and defend
their validity.
Page 13
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits.
Ex. 27 Financial Data Schedule
b) Reports on Form 8-K.
None.
Page 14
<PAGE> 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)
May 12, 1999 /s/ Mark B. Logan
(Date) ----------------------------------------
Mark B. Logan
Chairman of the Board and
Chief Executive Officer
May 12, 1999 /s/ Timothy R. Maier
(Date) ----------------------------------------
Timothy R. Maier
Executive Vice President and
Chief Financial Officer (principal
financial officer)
May 12, 1999 /s/ Derek A. Bertocci
(Date) ----------------------------------------
Derek A. Bertocci
Vice President, Controller (principal
accounting officer)
Page 15
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