Exhibit 99.1
FOR IMMEDIATE RELEASE Contact: Larry Tannenbaum
Chief Financial Officer
650-940-4700
IRIDEX REPORTS THIRD QUARTER
OPERATING PERFORMANCE
MOUNTAIN VIEW, CA, October 19, 2004---IRIDEX Corporation (NASDAQ/NMS: IRIX)
today reported results for the quarter ended October 2, 2004. Revenue for the
quarter decreased 1.1% to $8.2 million from $8.3 million reported for the third
quarter a year ago that ended September 27, 2003. The Company recorded a net
loss of $720,000, or $0.10 per share for the third quarter of 2004 as compared
with a net profit of $261,000, or $0.04 per share for the third quarter of 2003.
Included in the third quarter 2004 net loss was a one-time charge of $1.2
million to establish a reserve for historical adjustments of state sales taxes.
Additionally during the third quarter of 2004, the Company reserved
approximately $300,000 for saleable, but aging and potentially excess inventory
partially associated with the Company's recent introduction of new products.
Ophthalmology sales totaled $7.2 million, an increase of 4.3% compared with the
third quarter of 2003. Dermatology sales were $1.0 million, a decrease of 28%
compared with the third quarter in 2003. Total Domestic and International sales
were down slightly compared to the third quarter in 2003. Since international
sales are denominated in US dollars, foreign currency fluctuations had no
material impact.
Year-to-date 2004 ophthalmology sales totaled $20.1 million, an increase of 7.9%
compared with the first three quarters of 2003. Dermatology sales year-to-date
were $3.6 million, a decrease of 17% compared with the first three quarters of
2003. Year-to-date International sales were up 12.1% while Domestic sales were
down 1.9% compared to the first three quarters of 2003.
Cash and cash equivalents at quarter-end were $18.1 million as compared to $16.3
million at the end of the fourth quarter in 2003, January 3, 2004. Inventories
were $8.4 million at the end of third quarter 2004, down from $8.7 million at
the end of fourth quarter in 2003. Inventory turns continued to show improvement
and were 2.2 at the end of Q3 2004 compared to 1.9 at the end of Q3 2003 and 1.8
for the 2003 fiscal year. Accounts receivable in Q3 2004 was $6.5 million,
resulting in DSO of 69 days which was the same DSO reported in Q3 2003 as
compared to the 66 days reported at the end of the fourth quarter in 2003.
"We are pleased with our two recent new product introductions, the IQ 810 in
ophthalmology and the VariLite 532/940 in dermatology and we are encouraged by
the year-over-year as well as the year to date growth in the ophthalmology
business despite the typical seasonality of the third quarter," said Theodore A.
Boutacoff, IRIDEX President and CEO. "Had it not been for the sales tax and
inventory charges adjustments, we would have been profitable for the quarter."
"The introduction of the VariLite in dermatology provides a cost effective
alternative for treating 19 different dermatology indications and the dual
wavelength expands on our existing platform to allow treatment of deeper larger
vessels such as leg veins. The IQ 810, our top-of-the-line infrared laser system
in ophthalmology, is designed to perform traditional and minimum intensity
photocoagulation (MIP) retinal and glaucoma procedures. We will feature the IQ
810 at the 2004 annual meeting of the American Academy of Ophthalmology (AAO) in
New Orleans. We have been notified by Dr. Elias Reichel, TTT4CNV Study Chairman
and Associate Professor of Ophthalmology at Tufts University School of
Medicine, that he intends to present updated information on the TTT4CNV Clinical
Trial for treating occult wet age-related macular degeneration (AMD) at the AAO
RETINA SUBSPECIALITY DAY PROGRAM on Friday this week," continued Mr.
Boutacoff.
Sales Tax and Inventory Write Downs
During the third Quarter 2004 the Company completed a comprehensive review of
its sales tax collection practices. Historically the Company had been collecting
and remitting sales tax in only those states where it believed it had nexus.
Based on this independent review, the Company will now begin to collect and
remit sales taxes from customers in additional states and will attempt to enter
into voluntary settlement agreements with certain states for the payment of
prior period sales taxes and associated interest. As a result the Company has
recorded a one-time charge of $1.2 million to establish a reserve for unpaid
sales taxes and interest. The $1.2 million, which represents the current
estimate of the amounts to be remitted to these states, could differ materially
from the actual amount recorded.
Mr. Boutacoff explained the one-time charges. "IRIDEX has proactively adopted
this sales tax collection policy to reflect current best corporate practices
across the United States. We believe that the $1.2 million charge will cover the
Company's potential sales tax obligation. We will not pursue historical sales
tax collection from our customers, but plan to collect sales taxes on all future
sales. Additionally, in light of our new product introductions, the Company
believes that it is prudent at this time to reserve $300,000, for saleable, but
aging and potentially excess inventory."
CONFERENCE CALL
IRIDEX management will conduct a conference call today at 2:00 p.m. PST/5:00
p.m. EST. Interested parties may access the live conference call via by dialing
(800) 591-6930 US or (617) 614-4908 International and entering Passcode
90217982, or visit the Company's website at www.iridex.com. A webcast version of
the Company's conference call will also be available by 4:00 p.m. PST/ 7:00 p.m.
EST today on the Company's website, www.iridex.com. In addition, a telephone
replay will be available beginning on October 19, 2004 through October 26, 2004
by dialing (888) 286-8010 US or (617) 801-6888 International and entering
Passcode 82941120.
ABOUT IRIDEX
IRIDEX Corporation is a leading worldwide provider of semiconductor-based laser
systems for the ophthalmology and dermatology markets. IRIDEX products are sold
in the United States through a direct sales force and internationally through a
network of independent distributors into more than 100 countries. For further
information, visit the Company's 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 Company's growth prospects,
sales, revenues, gross margins, operating efficiencies and profitability, as
well as the timing of the release of results of studies related to our products,
prospects for our product introductions and developments in the businesses of
users of our products. These statements are subject to risks and uncertainties
and actual results could differ materially from those projected in the
forward-looking statements based on, among other things, the actual order and
shipment rate for the Company's ophthalmology and dermatology product lines,
market acceptance of the Company's products, the impact of any continuing
weakness and uncertainties related to general economic conditions or weakness in
overall demand in the Company's markets, especially with regard to the Company's
dermatology products which are typically used for elective procedures that can
be deferred, the Company's ability to continue to reduce its costs and improve
its operating efficiencies and the timing of the release of and actual results
of studies related to our products. 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 Company's network of independent distributors, the risks associated with
bringing new products to market, the results of clinical trials and competition
in our markets. For additional risks, please see those contained in our
Quarterly Reports on Form 10-Q and Annual Report on Form 10-K for the fiscal
year ended January 3, 2004 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)
Three Months Ended Nine Months Ended
October 2, September 27, October 2, September 27,
2004 2003 2004 2003
---- ---- ---- ----
Sales $ 8,178 $ 8,267 $ 23,679 $ 22,928
Cost of sales 4,708 4,678 13,187 12,981
-------- -------- -------- --------
Gross profit 3,470 3,589 10,492 9,947
-------- -------- -------- --------
Operating expenses:
Research and development 1,025 975 3,409 2,972
Sales, general and administrative 3,855 2,402 8,452 7,430
-------- -------- -------- --------
Total operating expenses 4,880 3,377 11,861 10,402
-------- -------- -------- --------
Income (loss) from operations (1,410) 212 (1,369) (455)
Interest and other income, net 83 49 212 154
-------- -------- -------- --------
Income (loss) before income taxes (1,327) 261 (1,157) (301)
Benefit from income taxes 607 0 553 181
-------- -------- -------- --------
Net income (loss) ($ 720) $ 261 ($ 604) ($ 120)
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Net income (loss) per common share - basic ($ 0.10) $ 0.04 ($ 0.08) ($ 0.02)
======== ======== ======== ========
Net income (loss) per common share - diluted ($ 0.10) $ 0.04 ($ 0.08) ($ 0.02)
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Shares used in per common share basic calculations 7,244 6,933 7,171 6,922
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Shares used in per common share diluted calculations 7,244 7,043 7,171 6,922
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IRIDEX Corporation
Condensed Consolidated Balance Sheets
(In thousands)
October 2, January 3,
2004 2004
---- ----
(unaudited)
ASSETS
------
Current Assets:
Cash and cash equivalents $ 8,612 $ 10,541
Available-for-sale securities 9,511 5,751
Accounts receivable, net 6,516 6,548
Inventories 8,405 8,721
Prepaids and other current assets 738 934
Current deferred income taxes 972 972
-------- --------
Total current assets 34,754 33,467
Property and equipment, net 772 850
Deferred income taxes 2,129 1,522
-------- --------
Total assets $ 37,655 $ 35,839
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable $ 950 $ 1,029
Accrued expenses 4,613 3,380
Deferred revenue 789 596
-------- --------
Total liabilities 6,352 5,005
-------- --------
Stockholders' Equity:
Common stock 74 70
Additional paid-in capital 24,988 23,900
Accumulated other comprehensive loss (20) (1)
Treasury stock (430) (430)
Retained earnings 6,691 7,295
-------- --------
Total stockholders' equity 31,303 30,834
-------- --------
Total liabilities and stockholders' equity $ 37,655 $ 35,839
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