e8vk
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
August 3, 2006
IRIDEX CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
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0-27598
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77-0210467 |
(State or other jurisdiction of
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(Commission File Number)
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(IRS Employer |
incorporation)
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Identification No.) |
1212 Terra Bella Avenue
Mountain View, California 94043
(Address of principal executive offices, including zip code)
(650) 940-4700
(Registrants telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c)) |
TABLE OF CONTENTS
Item 2.02. Results of Operations and Financial Condition.
On August 3, 2006, the Registrant reported its results of operations for the second quarter of
its 2006 fiscal year, which ended July 1, 2006. A copy of the press release issued by the
Registrant concerning the Registrants results of operations for the second quarter of its 2006
fiscal year, which ended July 1, 2006, is furnished as Exhibit 99.1 and is incorporated herein by
reference.
This information shall not be deemed filed for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the Exchange Act), or incorporated by reference in any filing
under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set
forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
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Exhibit No. |
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Description |
99.1
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Press Release dated August 3, 2006. |
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 hereunto duly authorized.
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IRIDEX CORPORATION
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By: |
/s/ Larry Tannenbaum
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Larry Tannenbaum |
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Chief Financial Officer, Secretary and Senior Vice President of
Finance and Administration |
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Date: August 3, 2006
EXHIBIT INDEX
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Exhibit No. |
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Description |
99.1
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Press Release dated August 3, 2006. |
exv99w1
Exhibit 99.1
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FOR IMMEDIATE RELEASE
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Contact:
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Larry Tannenbaum |
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Chief Financial Officer |
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650 940-4700 |
August 3, 2006
Mountain View, California
IRIDEX Reports Second Quarter Financial Results
Second Quarter Disposable Revenue Grows 24% Year-Over-Year
Gross Margin Increases by almost Five Percentage Points Year-Over-Year
GAAP Earning per Share $0.01
Cash Position Increases to $22.3 Million
IRIDEX
Corporation (Nasdaq/NMS: IRIX) today reported financial results for the second quarter
ended July 1, 2006. Sales for the period were $8.7 million, compared with $9.4 million reported for
the second quarter of 2005. For the six-month period ended July 1, 2006, sales were $17.7 million,
a slight increase from the $17.5 million reported for the same period of 2005. Net income for the
quarter was $48,000 or $0.01 earning per share, including the effect of SFAS 123(R) compared with net income of $430,000 in the year-ago period or $0.05 earning per
share, which excluded the effect of SFAS 123R. In the second quarter of 2006, the Company recorded a pre-tax charge related to
SFAS 123(R) of $478,000 and in addition booked over $700,000 in legal, relocation and Innovatech
patent acquisition expenses that negatively impacted net income.
During the quarter, the Company also recorded a tax benefit of $270,000.
Total revenues for the quarter were below our expectations primarily based on lower-than-expected
sales in the domestic dermatology business and to a lesser extent delays in finalizing sales
transactions during the second quarter in our international ophthalmic equipment segment, said
Barry G. Caldwell, IRIDEX President and CEO. We have already begun the work necessary to regain
our momentum in the domestic dermatology segment and all of the international ophthalmic equipment sales
delayed during the second quarter have already been recorded in the third quarter. We were very pleased
with our overall quarter over quarter growth of 24% in disposable sales and believe that our
strategies to grow the disposable probe revenues continue to gain traction. As a result, we believe that we remain on track to achieve double-digit revenue
growth for 2006. Another bright point for the quarter was that gross margins of 53% improved almost five
percentage points compared with last year.
In addition, we continued to achieve steady growth in our U.S. direct ophthalmology business,
which was up 12% in the second quarter and more than 18% during the first six months of 2006,
continued Mr. Caldwell. During the second quarter, we faced some challenges in our international
ophthalmology business regarding issues with letters of credit and shipping, which resulted in the
lower-than-expected revenue. We are encouraged however, by our year-to-date international
ophthalmology sales growth of more than 7% compared with the same
period of last year. For the first six months of 2006, total ophthalmic sales were $15.2 million,
up 10% compared with $13.9 million reported for the comparable period of 2005.
U.S. direct ophthalmic sales of disposable probes grew by 38% during the quarter and during the
first six months of 2006 the increase was 32% compared with the same period in 2005. International
sales of disposable probes increased by 15% during the quarter and grew 20% during the first six
months. Our ability to continue to achieve strong disposable revenue growth illustrates the value
of our new product introductions and our new focus in this area, continued Mr. Caldwell. During
the first six months of 2006, we grew our disposable probe sales by 27% and believe that we can, at
a minimum, maintain this growth trajectory throughout 2006. New disposable probes introduced
during the past 18 months represented 19% of the total disposable sales for the year to date.
Recurring revenue which includes both disposable and technical service revenue represented 45% of
total revenues during the second quarter of 2006. Recurring revenue represented 33% of total
revenue in 2004, 36% in 2005 and during the first six months of 2006 it represented 44% of total
revenues.
During the quarter we previously announced that we had acquired the rights to the patent
application on the Innovatech Intuitive Laser Probe, which we believe will be additive to our
strong and growing disposable probe patent portfolio. We have invested significantly in our
intellectual property over the years and we are committed to defending our patent estate because it
is a critical component of our growth strategy, continued Mr. Caldwell. We were very pleased
with the outcome of the recent Markman hearing in our litigation with Synergetics USA, Inc. The
judge agreed with our interpretation of 13 out of 14 patent terms that were at issue, and validated
the breadth of our patent. We believe that this ruling increases our chances that
the ultimate decision will be that the Synergetics products, which they have marketed for more than
six years, infringe our 492 patent.
Dermatology sales declined to $1.1 million in the second quarter of 2006 from $1.7 million in the
comparable period in 2005, and were impacted by unfilled positions on the dermatology sales team.
During the second quarter, we continued to face ongoing challenges in our dermatology business,
continued Mr. Caldwell. As we discussed last quarter, we are focused on building a highly
productive sales team for this business and unfortunately this resulted in nearly half of our sales
positions being unfilled for most of the second quarter. Recently, we have filled all of those
positions except one and believe we have a strong, focused team in place that will be able to
deliver sales growth during the third and fourth quarters. While the timeline for turning this
situation around has been pushed out a bit, we understand what needs
to be done and are addressing these issues.
As previously stated, one of the key goals going forward is to move the gross margin percentages
into the mid 50% range as it has been in the mid 40% range during the past few years, continued
Mr. Caldwell. For the second quarter, gross
margins expanded by almost five percentage points to 53.0% from 48.4% in the year-ago period,
driven, in part, by higher sales of disposable probes.
Cash and cash equivalents and available-for-sale-securities as of July 1, 2006 were $22.3 million,
up from $21.4 million at December 31, 2005. Inventories were $8.8 million compared with $9.0
million at the end of second quarter in 2005 and $8.6 million on December 31, 2005. Inventory turns
were 1.9 turns in the second quarter of 2006 compared with 2.1 turns for the second quarter of 2005
and 2.2 turns for the full 2005 fiscal year. Accounts receivable were $6.3 million as of July 1,
2006 compared with $6.6 million on December 31, 2005. Quarterly days sales outstanding (DSOs)
improved to 65 days in the second quarter of 2006 compared with 68 days for the second quarter of
2005 and 69 days for the full 2005 fiscal year.
We are well positioned to continue to execute our growth strategy, continued Mr. Caldwell.
Weve invested significant resources toward implementing aggressive sales and marketing programs,
increasing the rate of new product introductions and solidifying our patent portfolio. So far
theses actions have resulted in very strong disposable revenue growth and 10% growth,
year-to-date, in our core ophthalmology business. We also remain on track to launch two new
ophthalmic laser consoles and six to eight new disposable products at this years American Academy
of Ophthalmology meeting. In our dermatology business, we have identified the challenges and have
implemented a corrective strategy that we believe will lead to improved results as the year
progresses. We continue to make progress on our acquisition growth strategy and believe that we
have several opportunities to execute an accretive acquisition before the end of 2006.
Conference Call
IRIDEX management will conduct a conference call today at 2:00 p.m. (Pacific Time) to discuss its
second quarter 2006 results and recent corporate developments. Interested parties may access the
live conference call via telephone by dialing 800-257-6566 for domestic participants or
303-205-0044 for international participants. Interested parties may also visit the Companys
website at www.iridex.com. A telephone replay will be available beginning later today, August 3,
2006 through Thursday, August 10, 2006 by dialing 800-405-2236 for domestic participants or
303-590-3000 for international participants. The passcode is 11066208#. In addition, later today an
archived version of the webcast will be available on the
Companys website at www.iridex.com.
About IRIDEX
IRIDEX Corporation is a leading worldwide provider of therapeutic based laser systems, disposable
laser probes and delivery devices to treat eye diseases in ophthalmology and skin diseases in
dermatology markets (also referred to as aesthetics). IRIDEX products are sold in the United States
through a direct sales
force and internationally through a network of 77 independent distributors into 107 countries. For
further information, visit the Companys website at
www.iridex.com.
Safe Harbor Statement
This announcement contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended and Section 21E of the Securities Act of 1934, as amended,
relating to the Companys growth strategy and prospects, revenues, gross margins, and earnings,
potential acquisitions, new product releases, and the outcome of pending or future litigation.
Actual results could differ materially and adversely from those projected in the forward- looking
statements based on, among other things, the actual order and shipment rate for the Companys
ophthalmology and dermatology product lines, the rate of sales to OEM customers, the rate of growth
in sales of disposables and services, the rate of introduction and market acceptance of the
Companys products, and the impact of any continuing weakness and uncertainties related to general
economic conditions or weakness in overall demand in the Companys markets, especially with regard
to the Companys dermatology products which are typically used for elective procedures that can be
deferred. Additional risks and uncertainties to which the Company are subject may include, but may
not necessarily be limited to, the amount of orders that the Company receives and ships, dependence
on international sales and the Companys network of independent distributors, the risks associated
with bringing new products to market, and the results of clinical trials and competition in our
markets, as well as the risks associated with a competitive market for management talent and the
risks inherent with identifying, negotiating and integrating strategic acquisitions of
complementary businesses, products or technologies. Please see a detailed description of these
risks contained in our Quarterly Reports on Form 10-Q and Annual Report on Form 10-K for the fiscal
year ended December 31, 2005 filed with the Securities and Exchange Commission. Forward-looking
statements contained in this announcement are made as of this date and will not be updated.
IRIDEX Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
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Three Months Ended |
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Six Months Ended |
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July 1, |
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July 2, |
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July 1, |
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July 2, |
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2006* |
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2005 |
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2006* |
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2005 |
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Sales |
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$ |
8,710 |
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$ |
9,387 |
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$ |
17,720 |
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$ |
17,532 |
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Cost of sales |
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4,092 |
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4,842 |
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8,756 |
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9,309 |
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Gross profit |
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4,618 |
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4,545 |
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8,964 |
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8,223 |
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Operating expenses: |
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Research and development |
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1,328 |
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922 |
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2,449 |
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1,961 |
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Sales, general and administrative |
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3,689 |
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3,065 |
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7,631 |
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5,862 |
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Total operating expenses |
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5,017 |
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3,987 |
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10,080 |
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7,823 |
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Income (loss) from operations |
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(399 |
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558 |
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(1,116 |
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400 |
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Interest and other income, net |
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177 |
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130 |
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356 |
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256 |
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Income (loss) before income taxes |
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(222 |
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688 |
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(760 |
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656 |
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Provision for income taxes |
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270 |
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(258 |
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545 |
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(246 |
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Net income (loss) |
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$ |
48 |
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$ |
430 |
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($215 |
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$ |
410 |
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Net income (loss) per common share basic |
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$ |
0.01 |
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$ |
0.06 |
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($0.03 |
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$ |
0.06 |
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Net income (loss) per common share diluted |
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$ |
0.01 |
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$ |
0.05 |
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($0.03 |
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$ |
0.05 |
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Shares used in per common share basic calculations |
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7,694 |
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7,362 |
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7,640 |
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7,339 |
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Shares used in per common share diluted calculations |
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8,633 |
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7,955 |
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8,479 |
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7,778 |
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* Includes the impact of SFAS 123(R)
IRIDEX Corporation
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
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July 1, |
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December 31, |
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2006 |
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2005 |
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Assets |
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Current Assets: |
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Cash and cash equivalents |
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$ |
3,738 |
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$ |
12,655 |
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Available-for-sale securities |
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18,540 |
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8,779 |
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Accounts receivable, net |
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6,258 |
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6,589 |
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Inventories |
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8,844 |
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8,594 |
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Prepaids and other current assets |
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1,026 |
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885 |
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Current deferred income taxes |
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1,415 |
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1,415 |
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Total current assets |
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39,821 |
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38,917 |
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Property and equipment, net |
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1,048 |
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1,114 |
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Deferred income taxes |
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1,099 |
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1,073 |
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Total assets |
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$ |
41,968 |
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$ |
41,104 |
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Liabilities and Stockholders Equity |
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Current Liabilities: |
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Accounts payable |
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$ |
1,356 |
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$ |
1,094 |
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Accrued expenses |
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2,895 |
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4,421 |
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Deferred revenue |
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1,201 |
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1,072 |
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Total liabilities |
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5,452 |
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6,587 |
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Stockholders Equity: |
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Common stock |
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78 |
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76 |
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Additional paid-in capital |
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28,524 |
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26,334 |
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Accumulated other comprehensive loss |
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(5 |
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(27 |
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Treasury stock |
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(430 |
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(430 |
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Retained earnings |
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8,349 |
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8,564 |
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Total stockholders equity |
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36,516 |
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34,517 |
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Total liabilities and stockholders equity |
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$ |
41,968 |
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$ |
41,104 |
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