<PAGE> 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 SEPTEMBER 30, 2000
OR
[ ] 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 October 31, 2000:
60,796,131
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VISX, INCORPORATED
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Interim Balance Sheets as 3
of September 30, 2000 and December 31, 1999
Condensed Consolidated Interim Statements of Operations for the Three Months 4
Ended September 30, 2000 and 1999 and for the Nine Months Ended September 30,
2000 and 1999
Condensed Consolidated Interim Statements of Cash Flows for the Nine Months 5
Ended September 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
Quantitative and Qualitative Disclosure About Market Risk 12
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
</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>
September 30, December 31,
2000 1999
------------ -----------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .............................................. $ 31,224 $ 25,842
Short-term investments ................................................. 189,761 232,517
Accounts receivable, net of allowance for doubtful accounts
of $2,721 and $1,773, respectively ................................... 41,405 51,254
Inventories ............................................................ 12,939 10,669
Deferred tax assets and prepaid expenses ............................... 17,369 29,192
--------- ---------
Total current assets ................................................ 292,698 349,474
PROPERTY AND EQUIPMENT, NET ................................................ 4,866 5,681
LONG-TERM DEFERRED TAX AND OTHER ASSETS .................................... 23,853 7,566
========= =========
$ 321,417 $ 362,721
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ....................................................... $ 6,742 $ 5,156
Accrued liabilities .................................................... 43,798 40,772
--------- ---------
Total current liabilities ........................................... 50,540 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 ............................................. 216,834 220,049
Treasury stock, at cost: 4,157,654 and 2,939 shares, respectively
(79,171) (153)
Accumulated comprehensive income (loss) ................................ (380) (947)
Retained earnings ...................................................... 132,944 97,195
--------- ---------
Total stockholders' equity ......................................... 270,877 316,793
--------- ---------
$ 321,417 $ 362,721
========= =========
</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 Nine months ended
September 30, September 30,
------------------------- --------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C>
REVENUES:
System sales ................................... $ 12,263 $ 23,321 $ 47,462 $ 50,083
License, service and other revenues ............ 33,451 56,347 110,254 146,037
--------- --------- --------- ---------
Total revenues ............................... 45,714 79,668 157,716 196,120
--------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of revenues ............................... 13,905 17,480 47,803 40,573
Marketing, general and administrative .......... 11,109 19,235 38,293 41,296
Research, development and regulatory ........... 4,218 4,599 11,069 11,550
--------- --------- --------- ---------
Total costs and expenses ..................... 29,232 41,314 97,165 93,419
--------- --------- --------- ---------
INCOME FROM OPERATIONS ............................. 16,482 38,354 60,551 102,701
Interest and other income ...................... 3,417 2,886 10,395 7,300
Litigation settlement .......................... -- -- (11,856) --
--------- --------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES ........... 19,899 41,240 59,090 110,001
Provision for income taxes ..................... 7,861 16,497 23,341 44,001
========= ========= ========= =========
NET INCOME ......................................... $ 12,038 $ 24,743 $ 35,749 $ 66,000
========= ========= ========= =========
EARNINGS PER SHARE
Basic .......................................... $ 0.20 $ 0.39 $ 0.58 $ 1.05
========= ========= ========= =========
Diluted ........................................ $ 0.19 $ 0.36 $ 0.56 $ .97
========= ========= ========= =========
SHARES USED FOR EARNINGS PER SHARE
Basic .......................................... 60,600 63,913 61,644 63,115
========= ========= ========= =========
Diluted ........................................ 63,248 68,727 64,132 67,991
========= ========= ========= =========
</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>
Nine months ended
September 30,
--------------------------
2000 1999
--------- ---------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................................... $ 35,749 $ 66,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization .............................................. 2,518 2,210
Income tax benefit from exercise of stock options .......................... 1,360 57,296
Increase (decrease) in cash flows from changes in operating assets and
liabilities:
Accounts receivable .................................................... 9,849 (18,484)
Inventories ............................................................ (2,270) (4,250)
Deferred tax assets and prepaid expenses ............................... 11,823 (11,590)
Long-term deferred tax and other assets ................................ (16,287) (2,401)
Accounts payable ....................................................... 1,586 10,185
Accrued liabilities .................................................... 3,026 2,733
--------- ---------
Net cash provided by operating activities .................................. 47,354 101,699
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .......................................................... (1,703) (2,997)
Purchase of short-term investments ............................................ (59,880) (135,861)
Proceeds from maturities of short-term investments ............................ 103,288 73,537
--------- ---------
Net cash (used in) investing activities .................................... 41,705 (65,321)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options, including income tax benefit ....................... 4,130 17,516
Repurchase of common stock .................................................... (87,807) (6,176)
--------- ---------
Net cash provided by (used in) financing activities ........................ (83,677) 11,340
--------- ---------
Net increase (decrease) in cash and cash equivalents .............................. 5,382 47,718
Cash and cash equivalents, beginning of period .................................... 25,842 29,870
========= =========
Cash and cash equivalents, end of period .......................................... $ 31,224 $ 77,588
========= =========
</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
SEPTEMBER 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 on Form 10-K and reports on Form 10-Q for the quarters ended March 31,
2000 and June 30, 2000 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, and unaudited.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
NET INCOME ................................................................ $12,038 $24,743 $35,749 $66,000
======= ======= ======= =======
BASIC EARNINGS PER SHARE
Income available to common shareholders ................................. $12,038 $24,743 $35,749 $66,000
Weighted average common shares outstanding .............................. 60,600 63,913 61,644 63,115
------- ------- ------- -------
Basic Earnings Per Share ................................................ $ 0.20 $ 0.39 $ 0.58 $ 1.05
======= ======= ======= =======
DILUTED EARNINGS PER SHARE
Income available to common shareholders ................................. $12,038 $24,743 $35,749 $66,000
------- ------- ------- -------
Weighted average common shares outstanding .............................. 60,600 63,913 61,644 63,115
Dilutive potential common shares from stock options ..................... 2,648 4,814 2,488 4,876
------- ------- ------- -------
Weighted average common shares and dilutive potential common shares ..... 63,248 68,727 64,132 67,991
------- ------- ------- -------
Diluted Earnings Per Share .............................................. $ 0.19 $ 0.36 $ 0.56 $ 0.97
======= ======= ======= =======
</TABLE>
Options to purchase 1,903,000 shares and 30,000 shares during the three
month periods ended September 30, 2000 and 1999, respectively, and 2,691,000
shares and 85,000 shares outstanding during the nine month periods ended
September 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.
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3. INVENTORIES (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ -----------
(unaudited)
<S> <C> <C>
Raw materials and subassemblies ...... $ 5,989 $ 5,310
Work in process ...................... 5,834 4,756
Finished goods ....................... 1,116 603
------- -------
Total .............................. $12,939 $10,669
======= =======
</TABLE>
4. COMPREHENSIVE INCOME (unaudited, in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET INCOME ................................................. $ 12,038 $ 24,743 $ 35,749 $ 66,000
OTHER COMPREHENSIVE INCOME
Change in unrealized holding gains (losses) on
available-for-sale securities ......................... 735 (42) 652 (650)
Change in accumulated foreign currency translation
adjustment ............................................ (84) 51 (85) 41
-------- -------- -------- --------
COMPREHENSIVE INCOME ....................................... $ 12,689 $ 24,752 $ 36,316 $ 65,391
======== ======== ======== ========
</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 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 in the
fourth quarter of 2000 and are evaluating the effect that SAB No. 101 may have
on our financial statements.
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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.
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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
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 Excimer 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
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------- ---------------------------------
REVENUES (000's) 2000 1999 Change 2000 1999 Change
------------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
System sales ........................... $ 12,263 $ 23,321 (47)% $ 47,462 $ 50,083 (5)%
Percent of total revenues ......... 26.8% 29.3% 30.1% 25.5%
License, service & other revenues ...... 33,451 56,347 (41)% 110,254 146,037 (25)%
Percent of total revenues ......... 73.2% 70.7% 69.9% 74.5%
Total .................................. $ 45,714 $ 79,668 (43)% $157,716 $196,120 (20)%
</TABLE>
In the third quarter of 2000 our sales of laser systems in international
markets were approximately unchanged from the third quarter of the prior year,
however in the United States we sold fewer laser systems than in the third
quarter of the prior year. We believe this decline in the United States was due
to a variety of factors including increased competition and customers deferring
purchases until we begin production of our next generation STAR S3(TM) Excimer
Laser System in the fourth quarter of 2000. In the first nine months of 2000 the
decline in system sales in the United States was largely offset by an increase
in system sales in international markets. The 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 as the result of increased competition and our introduction of
upcoming new products including our next generation STAR S3(TM) Excimer Laser
System and our WaveScan(TM) Wavefront System ("WaveScan").
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Based on our analysis of sales data and developments in the U.S. laser
vision correction market during the first quarter of 2000, we concluded 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. As a
result our license, service and other revenues in both the third quarter and
first nine months of 2000 were lower than in the comparable periods of 1999.
Sales volumes of VisionKey(R) cards for licensed procedures in the U.S. were
higher in the third quarter and first nine months of 2000 than in the comparable
periods of 1999. 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 period of 1999, we believe the reduced fee will
help increase 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.
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------------- ---------------------------------------
COSTS & EXPENSES (000's) 2000 1999 Change 2000 1999 Change
------------------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cost of revenues .................. $ 13,905 $ 17,480 (20)% $ 47,803 $ 40,573 18%
Percent of total revenues .... 30.4% 21.9% 30.3% 20.7%
Marketing, gen'l and admin ........ 11,109 19,235 (42)% 38,293 41,296 (7)%
Percent of total revenues .... 24.3% 24.1% 24.3% 21.1%
R&D and regulatory ................ 4,218 4,599 (8)% 11,069 11,550 (4)%
Percent of total revenues .... 9.2% 5.8% 7.0% 5.9%
</TABLE>
Cost of revenues in the third quarter of 2000 decreased from the
comparable period of the prior year principally because we sold fewer laser
systems in the United States. For the first nine months of 2000 cost of revenues
increased over the comparable period of the prior year because we sold more
laser 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 in the third
quarter and the first nine months of 2000 from the comparable periods of the
prior year. Legal expenses declined because settlements were reached and trials
completed in several cases in the first half of 2000. Conversely, in 1999 we
incurred substantial legal expenses due to the International Trade Commission
(ITC) trial regarding its investigation of Nidek Co., Ltd., the Federal Trade
Commission (FTC) administrative action, and other patent litigation. Marketing
expenses in the third quarter of 2000 declined from the same quarter of 1999
principally because we changed from direct consumer advertising to other
marketing programs. 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 interest rates and the average balance
of cash invested in interest bearing securities have been higher in 2000 than in
1999. We accrued income taxes based on our expected effective income tax rate
for all of 2000, net of credits anticipated.
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LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and short-term investments ("cash") and working
capital were as follows.
<TABLE>
<CAPTION>
(000's)
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
Cash, cash equivalents and short-term investments ..... $220,985 $258,359
Working capital ....................................... 242,158 303,546
</TABLE>
Cash decreased by $37 million in the first nine months of 2000
principally because the $47 million we generated from operations was more than
offset by $88 million we spent to repurchase 4.6 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 $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,
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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 nine months ended September
30, 2000 to our exposure to market risk for changes in interest rates and
foreign currency exchange rates.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
VISX is engaged in numerous legal proceedings. Many of the cases focus
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. Finally, in a couple of cases the plaintiffs allege that VISX
has infringed the plaintiff's patent rights. 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 reports on Form
10-Q for the quarters ended March 31, 2000 and June 30, 2000. During the quarter
ended September 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 AND USERS OF NIDEK LASERS
In October 2000 VISX amended its law suits against Nidek and the users
of Nidek's laser systems to assert only VISX United States Patent Nos. 5,108,388
and 5,735,843 in those cases (MDL Docket No. 1319). In October 2000, VISX
initiated a new proceeding against Antoine L. Garabet in the United States
District Court in Northern California alleging, among other things, that Dr.
Garabet's use of the Nidek laser system infringes VISX United States Patent Nos.
5,108,388 and 5,735,843 and seeking damages and injunctive relief. USDC ND Cal
CA No. C00-3633-CRB.
Adverse determinations in any of the proceedings filed in the United
States against Nidek or the users of Nidek's laser systems could limit VISX's
ability to collect license fees in the United States from
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Nidek as well as from other sellers or users of laser vision correction systems.
Any such adverse determination could have a material adverse effect on VISX's
license revenues and therefore its business, financial position and results of
operations.
Japan. In connection with the patent infringement action filed by Nidek
in Tokyo District Court in Japan against VISX's Japanese subsidiary and others
alleging infringement of Nidek's Japanese Patent No. 2809959, VISX has initiated
proceedings in the Japan Patent Office challenging the validity of that Nidek
patent. It is too early to predict the outcome of these proceedings.
PATENT LITIGATION: BAUSCH & LOMB SURGICAL
In September 2000 VISX filed an action against Bausch & Lomb Surgical,
Inc. in United States District Court in Delaware alleging that Bausch & Lomb
Surgical had infringed VISX United States Patent No. 5,108,388 (USDC Del. CA No
00-849 JJF). In this case VISX is seeking damages and injunctive relief.
Discovery has not commenced and it is too early to predict the outcome of the
case. An adverse determination in this action could limit VISX's ability to
collect license fees from Bausch & Lomb Surgical as well as from other sellers
or users of laser vision correction systems. Any such adverse determination
could have a material adverse effect on VISX's license revenues and therefore
its business, financial position and results of operations.
SHAREHOLDER ACTIONS
On September 20, 2000, VISX and certain of its officers named as
defendants in a securities class action pending in the U.S. District Court for
the Northern District of California, captioned In re VISX, Inc. Securities
Litigation, C-00-0649-CRB, filed a motion to dismiss the consolidated amended
complaint. The hearing on the motion to dismiss is scheduled for January 5,
2001.
On October 3, 2000, the Superior Court of the State of California, Santa
Clara County, sustained the demurrers to the purported shareholder derivative
action filed against certain officers and directors of VISX, captioned Glassman
v. Logan, No. CV789364, with leave granted to file an amended derivative
complaint.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On July 28, 2000, the Board of Directors of the Company adopted a
Stockholder Rights Plan which is fully described in a Registration Statement on
Form 8-A filed with the Securities and Exchange Commission on August 14, 2000.
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.
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
<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)
November 10, 2000 /s/ Mark B. Logan
(Date) -----------------------------------
Mark B. Logan
Chairman of the Board and
Chief Executive Officer
November 10, 2000 /s/ Timothy R. Maier
(Date) -----------------------------------
Timothy R. Maier
Executive Vice President and
Chief Financial Officer (principal
financial officer)
November 10, 2000 /s/ Derek A. Bertocci
(Date) -----------------------------------
Derek A. Bertocci
Vice President, Controller (principal
accounting officer)
Page 15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
-------- -----------
<S> <C>
Ex.27 Financial Data Schedule
</TABLE>
