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EX-31.2 - EX-31.2 - IRIS INTERNATIONAL INC | v59458exv31w2.htm |
EX-31.1 - EX-31.1 - IRIS INTERNATIONAL INC | v59458exv31w1.htm |
EX-32.2 - EX-32.2 - IRIS INTERNATIONAL INC | v59458exv32w2.htm |
EX-32.1 - EX-32.1 - IRIS INTERNATIONAL INC | v59458exv32w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 2011
or
o | Transition Report Pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to .
Commission file number 1-11181
IRIS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) |
94-2579751 (I.R.S. Employer Identification No.) |
9158 Eton Avenue
Chatsworth, California 91311
(Address of principal executive offices, zip code)
Chatsworth, California 91311
(Address of principal executive offices, zip code)
(818) 527-7000
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the
Exchange Act (Check one):
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
As of May 3, 2011, the issuer had 17,797,114 shares of common stock issued and outstanding.
IRIS INTERNATIONAL, INC.
INDEX TO FORM 10-Q
INDEX TO FORM 10-Q
2
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PART I: FINANCIAL INFORMATION
Item 1. | Financial Statements |
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 24,602 | $ | 25,531 | ||||
Accounts receivable, net of allowance for doubtful
accounts and sales returns of $440 and $453 |
20,991 | 20,733 | ||||||
Inventories |
11,548 | 10,310 | ||||||
Prepaid expenses and other current assets |
1,739 | 1,661 | ||||||
Investment in sales-type leases, current portion |
3,677 | 3,578 | ||||||
Deferred tax asset |
3,862 | 3,135 | ||||||
Total current assets |
66,419 | 64,948 | ||||||
Property and equipment, net of accumulated
depreciation of $15,298 and $14,491 |
13,862 | 12,035 | ||||||
Goodwill |
3,911 | 3,957 | ||||||
Intangible assets, net of accumulated amortization of
$614 and $529 |
9,172 | 9,345 | ||||||
Software development costs, net of accumulated
amortization of $4,433 and $4,226 |
2,474 | 2,637 | ||||||
Deferred tax asset |
1,697 | 2,615 | ||||||
Investment in sales-type leases, non-current portion |
10,171 | 10,002 | ||||||
Other assets |
1,152 | 1,070 | ||||||
Total assets |
$ | 108,858 | $ | 106,609 | ||||
Liabilities and Stockholders Equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 8,111 | $ | 5,795 | ||||
Accrued expenses |
7,539 | 7,513 | ||||||
Deferred service contract revenue, current portion |
3,238 | 3,205 | ||||||
Total current liabilities |
18,888 | 16,513 | ||||||
Deferred service contract revenue, non-current portion |
66 | 71 | ||||||
Other long term liabilities |
146 | 1,374 | ||||||
Total liabilities |
$ | 19,100 | $ | 17,958 | ||||
Commitments and contingencies |
||||||||
Shareholders equity: |
||||||||
Common stock, $0.01 par value; authorized: 50 million
shares; issued and outstanding: 17,796 shares and
17,791 shares |
178 | 178 | ||||||
Preferred Stock, $.01 par value; authorized 1.0
million shares: Callable Series C shares issued and
outstanding: none |
| | ||||||
Additional paid-in capital |
90,338 | 89,703 | ||||||
Other comprehensive income |
89 | 140 | ||||||
Accumulated deficit |
(847 | ) | (1,370 | ) | ||||
Total shareholders equity |
89,758 | 88,651 | ||||||
Total liabilities and shareholders equity |
$ | 108,858 | $ | 106,609 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
3
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IRIS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited in thousands, except for per share data)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited in thousands, except for per share data)
For the three months | ||||||||
ended March 31, | ||||||||
2011 | 2010 | |||||||
Revenues |
||||||||
IDD instruments |
$ | 6,538 | $ | 7,889 | ||||
IDD consumables and service |
16,744 | 14,391 | ||||||
Sample processing instruments and supplies |
3,594 | 3,700 | ||||||
Personalized medicine services |
63 | | ||||||
Total revenues |
26,939 | 25,980 | ||||||
Cost of Revenue |
||||||||
IDD instruments |
4,265 | 5,068 | ||||||
IDD consumables and service |
7,375 | 5,955 | ||||||
Sample processing instruments and supplies |
1,670 | 1,703 | ||||||
Personalized medicine services |
522 | | ||||||
Total cost of goods sold |
13,832 | 12,726 | ||||||
Gross profit |
13,107 | 13,254 | ||||||
Marketing and selling |
5,970 | 4,427 | ||||||
General and administrative |
4,802 | 3,737 | ||||||
Research and development, net |
3,635 | 3,688 | ||||||
Gain on revaluation of contingent consideration |
(1,225 | ) | | |||||
Total operating expenses |
13,182 | 11,852 | ||||||
Operating income (loss) |
(75 | ) | 1,402 | |||||
Other income (expense): |
||||||||
Interest income |
277 | 237 | ||||||
Interest expense |
(2 | ) | (3 | ) | ||||
Other income (expense) |
385 | (57 | ) | |||||
Income before provision for income taxes |
585 | 1,579 | ||||||
Provision for income taxes |
62 | 537 | ||||||
Net income |
$ | 523 | $ | 1,042 | ||||
Net income per share basic |
$ | 0.03 | $ | 0.06 | ||||
Net income per share diluted |
$ | 0.03 | $ | 0.06 | ||||
Weighted average common shares outstanding basic |
17,717 | 17,891 | ||||||
Weighted average common shares outstanding diluted |
17,812 | 18,025 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
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For the three months | ||||||||
ended March 31, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 523 | $ | 1,042 | ||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
||||||||
Loss on disposal of fixed assets |
48 | | ||||||
Gain on foreign currency remeasurement of
intercompany balances |
(389 | ) | | |||||
Gain on revaluation of contingent consideration |
(1,225 | ) | | |||||
Deferred taxes |
(66 | ) | | |||||
Tax benefit from stock option exercises |
(3 | ) | | |||||
Depreciation and amortization |
1,218 | 1,006 | ||||||
Common stock and stock based compensation |
1,000 | 1,090 | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(137 | ) | (1,189 | ) | ||||
Inventories |
(1,167 | ) | (307 | ) | ||||
Prepaid expenses and other current assets |
(149 | ) | (246 | ) | ||||
Investment in sales-type leases |
(239 | ) | (449 | ) | ||||
Accounts payable |
2,400 | 1,557 | ||||||
Accrued expenses |
(30 | ) | 730 | |||||
Deferred service contract revenue |
(60 | ) | 475 | |||||
Other liabilities |
(4 | ) | | |||||
Net cash provided by operating activities |
1,720 | 3,709 | ||||||
Cash flows from investing activities: |
||||||||
Purchase of assets from European distributor |
| (671 | ) | |||||
Refund on acquisition of business |
46 | | ||||||
Acquisition of property and equipment |
(2,661 | ) | (118 | ) | ||||
Software development costs capitalized |
(47 | ) | (184 | ) | ||||
Net cash used in investing activities |
(2,662 | ) | (973 | ) | ||||
Cash flows from financing activities: |
||||||||
Issuance of common stock and warrants for cash |
2 | 28 | ||||||
Settlement on restricted stock withholding |
(113 | ) | (121 | ) | ||||
Tax benefit from stock option exercises |
3 | | ||||||
Net cash used in financing activities |
(108 | ) | (93 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents |
121 | (386 | ) | |||||
Net increase (decrease) in cash and cash equivalents |
(929 | ) | 2,257 | |||||
Cash and cash equivalents at beginning of period |
25,531 | 34,253 | ||||||
Cash and cash equivalents at end of period |
$ | 24,602 | $ | 36,510 | ||||
Supplemental disclosure of cash flow information: |
||||||||
Cash paid for income taxes |
$ | 67 | $ | 197 | ||||
Cash paid for interest |
$ | 2 | $ | 3 |
Supplemental schedule of non-cash financing activities:
During the three months ended March 31, 2011, the Company disposed of property and equipment with a cost and
accumulated depreciation of $259 and $211, respectively.
The accompanying notes are an integral part of these consolidated financial statements.
5
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1. Description of Business
IRIS International, Inc. (the Company) was incorporated in California in 1979 and
reincorporated in 1987 in Delaware. IRIS International, Inc. consists of three operating units. The
Companys in-vitro diagnostics segment also called Iris Diagnostics Division (IDD), designs,
manufactures and markets systems, consumables and supplies for urinalysis and body fluids. The
Sample Processing segment markets small centrifuges and other processing equipment and accessories
for rapid specimen processing, as well as, equipment for fluorescent in-situ hybridization (FISH).
The Personalized Medicine segment combines the research and development operations of the Companys
Iris Molecular Diagnostics and Arista Molecular, Inc. subsidiaries. Under this new segment we
consolidate all operations for the development and commercialization of cancer diagnostic testing
services and related products.
2. Interim Financial Reporting
Basis of Presentation The financial statements have been prepared in accordance with the
instructions to Form 10-Q under the Securities Exchange Act of 1934, as amended, and do not include
all of the information and note disclosures required by accounting principles generally accepted in
the United States (GAAP). These financial statements should be read in conjunction with the
Consolidated Financial Statements and accompanying notes contained in the Companys Annual Report
on Form 10-K for the year ended December 31, 2010.
The Consolidated Financial Statements included herein are unaudited, but in the opinion of
management, such financial statements include all adjustments, including normal recurring
adjustments, necessary to summarize fairly the Companys financial position and results of
operations for the interim periods. The results reported in these Consolidated Financial Statements
for the interim periods should not be taken as indicative of results that may be expected for the
entire year.
Use of Estimates The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting periods. The
significant estimates in the preparation of the consolidated financial statements relate to the
assessment of the carrying allowance for doubtful accounts, inventory reserves, the useful lives,
fair value and recoverability of carrying value of long-lived and intangible assets, including
goodwill, unearned income on sales-type leases, estimated provisions for warranty costs, laboratory
information system implementations, contingent consideration and deferred tax assets. Actual
results and outcomes may differ from managements estimates and assumptions.
Earnings Per Share The Company computes and presents earnings per share in accordance with
Financial Accounting Standards Board (FASB) ASC Topic 260, Earnings per share. Basic earnings
per share are computed by dividing net income by the weighted average number of common shares
outstanding. Diluted earnings per share is computed by dividing net income by the weighted average
number of common shares and common stock equivalents outstanding, calculated on the treasury stock
method for options and warrants using the average market prices during the period.
6
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IRIS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
The weighted
average number of outstanding antidilutive common stock options excluded from the computation of
diluted net income per common share for the three months ended
March 31, 2011 and 2010 was 2,673,000 and 1,818,000 respectively. A reconciliation of the shares used in the calculation
of basic and diluted earnings per common share is as follows:
For the three months ended | ||||||||
March 31, | ||||||||
(in thousands) | ||||||||
2011 | 2010 | |||||||
Weighted average common shares outstanding basic |
17,717 | 17,891 | ||||||
Dilutive stock options and warrants |
67 | 102 | ||||||
Dilutive restricted common shares and restricted stock units |
28 | 32 | ||||||
Weighted average common shares outstanding diluted |
17,812 | 18,025 | ||||||
Foreign Currency Hedge The Company conducts business in certain foreign markets, primarily
in the European Union and Asia. To mitigate the potential impact of adverse fluctuations in the
U.S. Dollar exchange rate for these currencies, the Company may periodically purchase foreign
currency forward contracts. The Company does not speculate in these hedging instruments in order
to profit from foreign currency exchanges nor does the Company enter into trades for which there
are no underlying exposures.
Under FASB ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities, the
Company documents all relationships between hedging instruments and hedged items, as well as its
risk management objective for undertaking these hedging transactions. This process includes
relating the forward contracts that are designated as fair value or cash flow hedges to specific
assets and liabilities on the balance sheet or to specific firm commitments or forecasted
transactions. The Company also formally assesses, both at the inception of the hedge and on an
ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or
cash flows of the hedged items.
At March 31, 2011 and 2010, the Company did not have any foreign currency forward contracts.
Goodwill and Intangible Assets - Goodwill represents the excess of the aggregate purchase
price over the fair value of the tangible and identifiable intangible assets acquired by the
Company. Goodwill and intangible assets with indefinite lives, which consists of a CLIA license,
are not amortized. Goodwill and intangible assets with indefinite lives are subject to impairment
tests on an annual basis or more frequently if facts and circumstances warrant such a review.
Goodwill and intangible assets with indefinite lives are evaluated in accordance with FASB ASC
Topic 350, Intangibles- Goodwill and Other (ASC 350), based on various analyses, including a
comparison of the carrying value of the reporting unit to its estimated fair value and discounted
cash flows. The analysis necessarily involves significant management judgment to evaluate the
capacity of an acquired business to perform within projections. If the carrying amount of a
reporting unit exceeds its fair value, the goodwill impairment test is performed to measure the
amount of the impairment loss, if any. During the three months ended March 31, 2011 and 2010, the
Company did not record any impairment charges related to goodwill or intangible assets with
indefinite lives.
Intangible assets are initially measured at their fair value, determined either by the fair
value of the consideration exchanged for the intangible asset, or the estimated discounted cash
flows expected to be generated from the intangible asset. Intangible assets with a finite life,
such as core technology, customer relationships and non-compete agreements are amortized on a
straight-line basis over their estimated useful life, ranging from 3 to 20 years. Intangible
assets with a finite life are evaluated for impairment using the methodology set forth in FASB ASC
Topic 360, Property, Plant and Equipment.
Recoverability of these assets is assessed only when events have occurred that may give rise
to a potential
impairment. When a potential impairment has been identified, forecasted
undiscounted net cash flows of the operations to which the asset relates are compared to the
current carrying value of the long-lived assets present in that operation. If such cash flows are
less than such carrying amounts, long-lived assets, including such intangibles, are written down to
their respective fair values. During the three months ended March 31, 2011 and 2010, no intangible
asset impairment was recorded.
7
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IRIS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
In determining the useful lives of intangible assets, the Company considers the expected use
of the assets and the effects of obsolescence, demand, competition, anticipated technological
advances, market influences and other economic factors. For technology based intangible assets,
the Company considers the expected life cycles of products which incorporate the corresponding
technology.
Goodwill decreased $46,000 during the three months ended March 31, 2011 due to a return of
purchase price from the seller of AlliedPath, Inc. (now Arista Molecular, Inc.) as a result of a
settlement of claims made against funds escrowed as security for representations and warranties
pursuant to the merger agreement, dated July 26, 2010. All of the goodwill balance relates to the
Personalized Medicine segment.
Foreign Currency Exchange Translation The functional currencies of the Companys foreign
subsidiaries are primarily accounted for in their respective local currencies. The statements of
operations of foreign operations are translated into U.S. dollars at rates of exchange in effect
each month. The balance sheets of these subsidiaries are translated at period-end exchange rates,
and the differences from historical exchanges rates are reflected in stockholders equity as other
comprehensive income (loss). Foreign currency transaction gains and losses from certain
intercompany transactions are recorded in foreign currency transaction gain (loss) in other income
(expense). Transactions denominated in currencies other than the functional currency are recorded
based on rates in effect at the time such transactions arise. Subsequent changes in exchange rates
result in transaction gains and losses and are reflected in the accompanying consolidated
statements of operations as unrealized (based on the applicable period-end exchange rate) or
realized upon settlement of the transactions. All other foreign currency gains and losses are also
recorded on foreign currency transaction gain (loss) and other. The Company recognized net foreign
currency transaction gain (loss) of $385,000 and $(57,000) for
the three months ended March 31, 2011
and 2010, respectively. Such gains and losses were primarily attributable to volatility in the
Euro and British Pound.
Foreign currency exchange gains (losses) related to intercompany balances were recorded in the
Companys statements of operations through March 31, 2011 as they represented short-term
intercompany trade payables and receivables. On March 31, 2011, a substantial portion of the
Companys intercompany balances from its European subsidiaries were converted to promissory notes
that are of a long-term investment nature (settlement of these notes is not planned or anticipated
in the foreseeable future). As a result, future foreign exchange gains and losses attributable to
these promissory notes will recorded in stockholders equity as other comprehensive income (loss).
8
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IRIS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
Reclassifications The Company reclassified amounts in segment and geographic information in
prior periods to add the new operating segment, Personalized Medicine (which is further described
in the Segments and Geographic footnote), to conform to the presentation used in the current
period. The Personalized Medicine composition includes the research and development operations of
Iris Molecular Diagnostics which had been included with the IDD segment in prior periods. These
reclassifications had no impact on the Companys previously reported income from operations, net
income or basic or diluted earnings per share.
Certain Risks and Uncertainties Financial instruments, which potentially expose
the Company to concentration of credit risk, consist primarily of cash and cash equivalents,
accounts receivable and investment in sales-type leases. Concentration of credit risk with respect
to accounts receivable and investment in sales-type leases is mitigated by the Companys
performance of on-going credit evaluations of its customers and the Company maintains an allowance
for doubtful accounts. Investments in sales-type leases are secured by the underlying instruments.
At March 31, 2011, the amount of the Companys cash deposited in demand deposit accounts which
are fully guaranteed by the Federal Deposit Insurance Corporation was $5.2 million. The rest of the
cash balances on deposit with banks are guaranteed by the Federal Deposit Insurance Corporation up
to $250,000. The Company may be exposed to risk for the amount of funds held in one bank in excess
of the insurance limit. In assessing the risk, the Companys policy is to maintain cash balances
with high quality financial institutions.
The Company derives most of its revenues from the sale of the urinalysis analyzers, and
related supplies and services. Relatively modest declines in unit sales or gross margins could
have a material adverse effect on the Companys revenues and profits, respectively.
Certain of the Companys components are obtained from outside vendors, and the loss or
breakdown of the Companys relationships with these outside vendors could subject the Company to
substantial delays in the delivery of its products to its customers. Furthermore, certain key
components of the Companys instruments and certain consumables are manufactured by only one
supplier. The Companys inability to sell products to meet delivery schedules could have a
material adverse effect on its reputation in the industry, as well as its financial condition and
results of operation.
3. Acquisition
On July 28, 2010, the Company acquired AlliedPath, Inc. AlliedPath is a high complexity
CLIA-certified molecular pathology laboratory offering differentiated, high value molecular
diagnostic services in the rapidly growing field of personalized medicine. Pursuant to the terms
of the merger agreement dated July 26, 2010, the Company acquired all the issued and outstanding
stock of AlliedPath for an amount in cash equal to $4.6 million less certain indebtedness existing
at the closing, with an additional earn-out of up to $1.3 million subject to the achievement of
specific sales and earnings targets through December 2013. We did not assume any outstanding
options or warrants of AlliedPath in connection with the acquisition. AlliedPath is now called
Arista Molecular, Inc. (Arista) and operates under the Personalized Medicine reporting segment of
the consolidated financial statements.
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IRIS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
Through the acquisition of Arista, the Company seeks to achieve the following goals:
| to expand beyond its initial molecular pathology test menu by adding other molecular panels, flow cytometry for the detection and monitoring of leukemia and lymphoma, FISH testing, and proprietary new tests based on the Companys NADiA technology platform; |
| to have better control of all aspects of the commercial operations of the NADiA platform, starting with NADiA ProsVue; |
| to enable the acceleration of the development efforts of the NADiA technology product pipeline; and |
| to enter the attractive personalized medicine market due to its significant growth potential. |
The aggregate consideration paid for the acquisition of Arista is as follows:
(In thousands) | ||||
Cash |
$ | 4,584 | ||
Fair value of contingent consideration |
1,210 | |||
Total purchase price |
$ | 5,794 | ||
The aggregate consideration shown above reflects a $46,000 return of purchase price recorded
during the three months ended March 31, 2011 (see Note 2, Goodwill and Intangible Assets).
The following table summarizes the estimated fair values of assets acquired and liabilities
assumed as of July 28, 2010.
(In thousands) | ||||
Current assets |
$ | 74 | ||
Property and equipment |
523 | |||
Core technology |
3,090 | |||
CLIA License |
1,604 | |||
Customer relationships |
6 | |||
Non-compete agreements |
100 | |||
Goodwill |
1,461 | |||
Other assets |
31 | |||
Current liabilities |
(316 | ) | ||
Lease obligations |
(178 | ) | ||
Other liabilities |
(61 | ) | ||
Deferred tax liability, net |
(540 | ) | ||
Total purchase price |
$ | 5,794 | ||
In determining the purchase price allocation, the Company considered, among other factors,
historical demand for products, estimates of future demand for those services, customer
relationships, the revenue generating potential of core technology, the assets useful lives, and
agreements not to compete. The market, income and cost approaches were used to determine fair
values of these intangibles. The rate
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IRIS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
used to discount the net cash flows to their present value was a 16.5% weighted average cost
of capital for the business as a whole, and from 16.5% to 17.5% for the individual intangible
assets depending on the risk associated with the assets potential to generate revenues and its
projected remaining useful economic life. The weighted average cost of capital was determined after
consideration of market rates of return on debt and equity capital of comparable companies, the
weighted average return on invested capital and the risk associated with achieving forecasted sales
related to technology and assets acquired. The fair value of the contingent consideration was
determined considering the probability of payout and using a 3% discount rate.
Subsequent changes in the fair value of the contingent consideration are recognized as a gain
or loss on revaluation of contingent consideration within operating expenses in the Companys
consolidated statement of operations. The Company considers the changes in the fair value of
contingent consideration obligation at each reporting date based on changes in discount rates,
timing and amount of revenue estimates and changes in probability assumptions with respect to the
probability of achieving the obligations. Accretion expense related to the increase in net present
value of the contingent liability is included in interest expense for the period. As a result of
significant revenue shortfalls at Arista relative to previous projections for the three months
ended March 31, 2011, sales projections for Arista were significantly reduced for all future
periods. The revised forecast projected revenues are significantly below earn-out targets for all
three years covered by the earn-out period. Management thus determined that the fair value
contingent consideration obligation was zero, which resulted in a decrease of $1.2 million from
December 31, 2010 to March 31, 2011. Consequently the Company recognized a gain on revaluation of
contingent consideration for the three months ended March 31, 2011.
Property and equipment net book value was evaluated at approximately fair value on the
acquisition date due to the nature and relative age of the assets acquired.
Acquired property and equipment are being depreciated on a straight-line basis with estimated
remaining useful lives ranging from 1 year to 5 years. Intangible assets except the CLIA license
are being amortized on a straight-line basis with estimated remaining useful lives ranging from 3
years to 15 years reflecting the expected future value. The CLIA license is considered to have an
indefinite useful life. The purchase was structured as a stock purchase therefore the value
assigned to the core technology, CLIA license, customers relationships, non-compete agreements and
goodwill is not deductible for tax purposes.
The following table summarizes unaudited pro forma financial information assuming the
acquisition of Arista had occurred in the corresponding period of the fiscal year immediately
preceding the acquisition. This unaudited pro forma financial information does not necessarily
represent what would have occurred if the transaction had taken place on January 1, 2009 (the
beginning of the year prior to the acquisition) and should not be taken as representative of the
Companys future consolidated results of operations or financial position.
For Three | ||||
Months Ended | ||||
March 31, | ||||
2010 | ||||
(In thousands) | ||||
Revenue |
$ | 25,986 | ||
Net income |
415 | |||
Net income per basic and diluted share |
$ | 0.02 |
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IRIS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
On November 22, 2010, the Company acquired the assets of a multi-purpose, bench-top instrument
platform for automating highly repetitive, manual laboratory protocols for FISH (fluorescence
in-situ hybridization) testing and other slide-based cytogenetic applications. The product
acquisition is a natural extension to the successful ThermoBrite® DNA Hybridization System and in
line with the Companys entry into personalized medicine with emphasis on cancer diagnostics. The
product prototypes and proprietary technology assets were purchased for $3.2 million in cash from
BioMicro Systems, Inc. The new product platform will be integrated into the Iris Sample Processing
Division and it is expected to position IRIS as a major competitor in the high growth cytogenetic
instrumentation market. This acquisition was recorded as an acquisition of assets determined not
to be a business, since no workforce nor strategic management, operational or resource management
processes were included in the purchase.
The purchase price of $3.2 million plus related asset acquisition costs of $94,000 was
allocated as follows: $3.2 million to core technology, recorded in intangible assets, and $99,000
to property and equipment on the Companys consolidated balance sheet as of March 31, 2011. The
purchase price allocation was based on estimates and available information. Although BioMicro
Systems built and tested a working prototype, which proved the technical feasibility of the base
technology, several elements of this technology platform require continued development in order to
reach salability for its stated purpose. Once development is completed, a useful life for the core
technology will be determined and the core technology will be amortized over the useful life
determined at that time.
4. Inventories
Inventories consist of the following:
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
(in thousands) | ||||||||
Finished goods |
$ | 3,743 | $ | 3,423 | ||||
Work-in-process |
213 | 181 | ||||||
Raw materials, parts and sub-assemblies |
7,592 | 6,706 | ||||||
Inventories |
$ | 11,548 | $ | 10,310 | ||||
5. Sales-type Leases
The components of net investment in sales-type leases consist of the following:
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
(in thousands) | ||||||||
Total minimum lease payments |
$ | 16,280 | $ | 16,044 | ||||
Less: unearned income |
(2,432 | ) | (2,464 | ) | ||||
Net investment in sales-type leases |
13,848 | 13,580 | ||||||
Less: current portion |
(3,677 | ) | (3,578 | ) | ||||
Net investment in sales-type leases, non-current portion |
$ | 10,171 | $ | 10,002 | ||||
12
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IRIS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
Future minimum lease payments due from customers under sales-type leases for each of the five
succeeding years and thereafter:
(In thousands) | ||||
Year Ending December 31, |
||||
2011 (nine months remaining) |
$ | 2,941 | ||
2012 |
3,355 | |||
2013 |
2,939 | |||
2014 |
2,566 | |||
2015 |
1,742 | |||
Thereafter |
305 | |||
$ | 13,848 | |||
Our leases are primarily to customers in the health care industry or to governments. We
assess credit risk for all of our customers including those who lease equipment. Credit risk is
assessed using an internally developed model which incorporates credit scores from third party
providers and our own custom risk ratings and is updated on a quarterly basis. The external credit
scores are developed based on the customers historical payment patterns and an overall assessment
of the likelihood of delinquent payments. Our internal ratings are weighted based on company size,
years in business, and other credit related factors (i.e. profitability, cash flow, liquidity,
tangible net worth, etc.). Any one of the following factors may result in a customer being
classified as high risk: i) the customer has a history of late payments; ii) the customer has open
lawsuits, liens or judgments; and iii) the customer has been in business less than three years.
Our lease receivables are collateralized by the equipments fair value, which mitigates our credit
risk. The following table presents the risk profile by creditworthiness category of our sales-type
lease receivables at March 31, 2011:
(In thousands) | ||||
Low risk |
$ | 12,399 | ||
Moderate risk |
752 | |||
High Risk |
697 | |||
$ | 13,848 | |||
The balance of the allowance for uncollectible accounts for our sales-type leases was zero as
of March 31, 2011. We determine the adequacy of our allowance for uncollectible accounts for
sales-type leases based on an analysis of historical write-offs. There have been no write-offs of
sales-type lease receivables for the three months ended March 31, 2011 or 2010. As of March 31,
2011, the amount of sales-type leases which were past due was not significant and there were no
impaired sales-type leases. Accordingly, there was no material risk of default with respect to
sales-type leases as of March 31, 2011.
6. Bank Credit Facility
The Company has a credit facility with a commercial bank. The credit facility consists of a
$6.5 million revolving line of credit for working capital and a $10.0 million line of credit for
acquisitions and product opportunities. The credit facility has variable interest rates, which
will change from time to time based on changes to either the LIBOR rate or the lenders prime rate.
Borrowings under the credit facility are secured by all of the Companys assets and mature in June
2010 and June 2015, respectively.
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IRIS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
As of March 31, 2011 and December 31, 2010, there were no borrowings under the credit
facility. The Company, however, is subject to certain financial and non-financial covenants under
the credit facility with the bank and as of March 31, 2011, the Company was in compliance with
these covenants.
7. Income Taxes
On a quarterly basis, the Company estimates the effective tax rate for the full fiscal year
and records a quarterly income tax provision based on the projected effective tax rate. As the
fiscal year progresses, the Company refines its estimate based on the facts and circumstances by
each tax jurisdiction. The effective tax rates for the three months ended March 31, 2011 and 2010
were 11% and 32%, respectively.
The Company will recognize potential interest and penalties related to income tax positions as
a component of the provision for income taxes in the statements of operations in any future periods
in which the Company must record such a liability. Since the Company has not recorded a liability
at March 31, 2011, no amount of interest or penalties were recorded in the statement of financial
condition or the statement of operations. Accordingly, there was no impact on the Companys
effective tax rate for such items. The Company does anticipate an increase of approximately
$500,000 in its unrecognized tax benefits related to certain credit carryforwards anticipated to be
generated within the next 12 months. The benefit of such items will be recorded through its
statement of operations when recognized.
8. Stock-Based Compensation
The Company accounts for stock-based compensation pursuant to FASB ASC Topic 505, Share-Based
Payment, which requires compensation costs related to share-based transactions, including employee
stock options, to be recognized in the financial statements based on fair value. Share-based
compensation expense for the three months ended March 31, 2011 and 2010 includes incremental
share-based compensation expense as follows:
For the three months ended | ||||||||
March 31, | ||||||||
(in thousands) | ||||||||
2011 | 2010 | |||||||
Cost of sales |
$ | 91 | $ | 114 | ||||
Marketing and selling |
158 | 187 | ||||||
General and administrative |
497 | 565 | ||||||
Research and development |
254 | 224 | ||||||
Stock-based compensation |
$ | 1,000 | $ | 1,090 | ||||
Stock Options
The Company has a stock option plan under which the Company may grant future non-qualified
stock options, incentive stock options and stock appreciation rights. No stock appreciation rights
have been granted under any of the Companys stock option plans. On July 13, 2007, the Companys
stockholders approved the adoption of the IRIS International, Inc. 2007 Stock Incentive Plan, which
initially authorized the issuance of up to 1,750,000 shares of common stock pursuant to equity
awards granted under the plan. On May 22, 2009, the Companys stockholders approved an increase of
1,550,000 shares to the 2007 Stock Incentive Plan for a total of 3,300,000 authorized shares.
14
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IRIS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
The following schedule sets forth options authorized, exercised, outstanding and available for
grant under the Companys existing stock option plans as of March 31, 2011:
Number of Option Shares | ||||||||||||||||||
(In thousands) | ||||||||||||||||||
Available | ||||||||||||||||||
Plan | Authorized | Exercised | Outstanding | for Grant | ||||||||||||||
1994 Plan |
700 | 680 | 20 | | ||||||||||||||
1998 Plan |
4,100 | 2,719 | 724 | | ||||||||||||||
2007 Plan |
3,300 | | 2,091 | 383 | ||||||||||||||
8,100 | 3,399 | 2,835 | 383 | |||||||||||||||
Stock option activity during the three months ended March 31, 2011 is as follows:
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Exercise | Remaining | Aggregate | ||||||||||||||
Price Per | Contractual | Intrinsic | ||||||||||||||
Shares | Share | Term | Value | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Outstanding at January 1, 2011 |
2,769 | $ | 12.26 | 4.8 years | $ | 1,564 | ||||||||||
Granted |
260 | $ | 9.84 | |||||||||||||
Exercised |
(1 | ) | $ | 2.00 | ||||||||||||
Canceled or expired |
(193 | ) | $ | 21.38 | ||||||||||||
Outstanding at March 31, 2011 |
2,835 | $ | 11.42 | 4.3 years | $ | 971 | ||||||||||
Exercisable at March 31, 2011 |
1,654 | $ | 12.14 | 3.2 years | $ | 966 | ||||||||||
The aggregate intrinsic value in the table above represents the total pretax intrinsic value
(the difference between the closing stock price on March 31, 2011 and the exercise price,
multiplied by the number of in-the-money options) that would have been received by the option
holders, had all option holders exercised their options on March 31, 2011. Total intrinsic value
of options exercised for the three months ended March 31, 2011 amounted to $9,000. As of March 31,
2011, total unrecognized stock-based compensation expense related to unvested stock options was
$4,876,000, which is expected to be recognized over the remaining weighted average period of
approximately 3.0 years.
The Compensation Committee of the board of directors determines the total value of the stock
based compensation grants. The exercise price of options is the closing price on the date the
options are granted. Payment of the exercise price may be made either in cash or with shares of
common stock that have been held at least six months. The options generally vest over four years
and expire either five or ten years from the date of grant. The fair value of each option grant is
estimated on the date of the grant using the Black-Scholes option-pricing model with the following
weighted average assumptions:
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IRIS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
For the three months | ||||||||
ended March 31, | ||||||||
2011 | 2010 | |||||||
Risk free interest rate |
1.8 | % | 2.0 | % | ||||
Expected lives (years) |
4.0 | 4.0 | ||||||
Expected volatility |
50.9 | % | 59.0 | % | ||||
Expected dividend yield |
0 | % | 0 | % |
The expected volatilities are based on the historical volatility of the Companys stock. The
observation is made on a weekly basis. The expected terms of the stock options are based on the
average vesting period on a basis consistent with the historical experience for similar option
grants. The risk-free interest rate is consistent with the expected terms of the stock options and
based on the U.S. Treasury yield curve in effect at the time of grant. The Company estimates
forfeiture rates based on historical data.
A summary of the Companys non-vested stock options during the three months ended March 31,
2011 is as follows:
Weighted | ||||||||
Average | ||||||||
Grant Date | ||||||||
Fair Value | ||||||||
Shares | Per Share | |||||||
(In thousands) | ||||||||
Non-vested options at January 1, 2011 |
1,127 | $ | 4.80 | |||||
Granted |
261 | $ | 4.09 | |||||
Vested |
(188 | ) | $ | 5.19 | ||||
Forfeited or expired |
(18 | ) | $ | 4.59 | ||||
Non-vested options at March 31, 2011 |
1,182 | $ | 4.58 | |||||
Restricted Shares
The Company began awarding restricted shares of its common stock in 2006. In March 2009, the
Company began to grant restricted stock units to its non-employee directors and to certain
employees. Such awards generally require that certain performance conditions and service
conditions be met before the awards vest. Restricted shares currently vest 25% after one year and
61/4% quarterly thereafter. However, non employee directors are immediately vested on the grant
date. Unvested restricted shares are forfeited if the recipients employment terminates for any
reason other than death, disability or special circumstances as determined by the Compensation
Committee of the Companys board of directors. Restricted share activity during the three months
ended March 31, 2011 was as follows:
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IRIS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
Weighted | ||||||||
Average | ||||||||
Grant Date | ||||||||
Fair Value | ||||||||
Shares | Per Share | |||||||
(in thousands) | ||||||||
Non-vested shares at January 1, 2011 |
286 | $ | 10.89 | |||||
Granted |
133 | $ | 9.85 | |||||
Vested |
(39 | ) | $ | 11.78 | ||||
Forfeited |
(12 | ) | $ | 10.54 | ||||
Non-vested shares at March 31, 2011 |
368 | $ | 10.44 | |||||
Fair value of the Companys restricted shares is based on the Companys closing stock price on
the date of grant. As of March 31, 2011, total unrecognized stock-based compensation expense
related to non-vested restricted share grants was $3,689,000 which is expected to be recognized
over the remaining weighted average period of approximately 3.1 years.
9. Contingencies
Litigation
From time to time, the Company is party to certain litigation arising in the normal course of
business. Management believes that the resolution of such matters will not have a material adverse
effect on the Companys financial position, results of operations or cash flows.
Guarantees
The Company enters into indemnification provisions under (i) agreements with other companies
in the ordinary course of business, typically with business partners, contractors, customers and
landlords, and (ii) agreements with investors. Under these provisions, the Company generally
indemnifies and holds harmless the indemnified party for losses suffered or incurred by the
indemnified party as a result of the Companys activities or, in some cases, as a result of the
indemnified partys activities under the agreement. These indemnification provisions often include
indemnifications relating to representations made by the Company with regard to intellectual
property rights. These indemnification provisions generally survive termination of the underlying
agreement. In addition, in some cases, the Company has agreed to reimburse employees for certain
expenses and to provide salary continuation during short-term disability. The maximum potential
amount of future payments the Company could be required to make under these indemnification
provisions is unlimited. The Company reviews its exposure under these agreements no less than
annually, or more frequently when events indicate. As a result, the Company believes the estimated
fair value of these agreements is minimal. Accordingly, the Company has not recorded any
liabilities for these agreements as of March 31, 2011 or December 31, 2010.
17
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IRIS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
10. Segments and Geographic Information
The Companys operations are organized on the basis of products and related services and under
FASB ASC Topic 280, Segment Reporting, the Company operates in three segments: (1) Iris Diagnostics
Division (IDD), (2) Sample Processing and (3) Personalized Medicine.
The IDD segment designs, develops, manufactures, markets and distributes in-vitro diagnostic
systems based on patented and proprietary technology for automating microscopic and clinical
chemistry procedures for urinalysis. The segment also provides ongoing sales of consumables and
services necessary for the operation of installed urinalysis workstations. In the United States,
these products are sold through a direct sales and service force. Internationally, these products
are sold and serviced through distributors, with the exception of France, Germany, United Kingdom
and Puerto Rico.
The Sample Processing segment designs, develops, manufactures and markets a variety of
benchtop centrifuges, small instruments and supplies. These products are used primarily for manual
specimen preparation and dedicated applications in coagulation, cytology, hematology, urinalysis
and DNA processing. These products are sold worldwide through distributors.
The Personalized Medicine segment operates a CLIA-certified laboratory focused on oncology and
molecular diagnostics services in personalized medicine. This segment also includes the research
and development operations of Iris Molecular Diagnostics, or IMD.
The accounting policies of the segments are the same as those described in the Summary of
Significant Accounting Policies in the Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 2010. The Company evaluates the performance of its segments and allocates
resources to them based on earnings before income taxes, excluding corporate charges.
18
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IRIS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
The tables below present information about reported segments for the three months ended March
31, 2011 and 2010:
Unallocated | ||||||||||||||||||||
Sample | Personalized | Corporate | ||||||||||||||||||
IDD | Processing | Medicine(1) | Expenses | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
For the three months ended March
31, 2011 |
||||||||||||||||||||
Revenues |
$ | 23,282 | $ | 3,594 | $ | 63 | $ | | $ | 26,939 | ||||||||||
Gross profit (loss) |
11,642 | 1,924 | (459 | ) | | 13,107 | ||||||||||||||
Marketing and selling |
4,709 | 344 | 917 | | 5,970 | |||||||||||||||
General and administrative |
1,608 | 384 | 748 | 2,062 | 4,802 | |||||||||||||||
Research and development, net |
2,184 | 218 | 1,233 | | 3,635 | |||||||||||||||
Gain on revaluation of contingent
consideration |
| | (1,225 | ) | | (1,225 | ) | |||||||||||||
Total operating expenses |
8,501 | 946 | 1,673 | 2,062 | 13,182 | |||||||||||||||
Operating income (loss) |
3,141 | 978 | (2,132 | ) | (2,062 | ) | (75 | ) | ||||||||||||
Interest income |
22 | | | 255 | 277 | |||||||||||||||
Interest expense |
| | | 2 | 2 | |||||||||||||||
Depreciation and amortization |
1,046 | 22 | 147 | 3 | 1,218 | |||||||||||||||
Segment pre-tax income (loss) |
4,014 | 947 | (2,139 | ) | (2,237 | ) | 585 | |||||||||||||
Segment assets |
82,612 | 8,856 | 11,830 | 5,560 | 108,858 | |||||||||||||||
Investment in long-lived assets |
25,128 | 3,997 | 11,616 | | 40,741 | |||||||||||||||
For the three months ended March
31, 2010 |
||||||||||||||||||||
Revenues |
$ | 22,280 | $ | 3,700 | $ | | $ | | $ | 25,980 | ||||||||||
Gross profit (loss) |
11,257 | 1,997 | | | 13,254 | |||||||||||||||
Marketing and selling |
4,143 | 284 | | | 4,427 | |||||||||||||||
General and administrative |
1,537 | 413 | | 1,787 | 3,737 | |||||||||||||||
Research and development, net |
2,132 | 133 | 1,423 | | 3,688 | |||||||||||||||
Gain on revaluation of contingent
consideration |
| | | | | |||||||||||||||
Total operating expenses |
7,812 | 830 | 1,423 | 1,787 | 11,852 | |||||||||||||||
Operating income (loss) |
3,445 | 1,167 | (1,423 | ) | (1,787 | ) | 1,402 | |||||||||||||
Interest income |
20 | 8 | | 209 | 237 | |||||||||||||||
Interest expense |
| | | 3 | 3 | |||||||||||||||
Depreciation and amortization |
887 | 51 | 64 | 4 | 1,006 | |||||||||||||||
Segment pre-tax income (loss) |
5,130 | 1,149 | (1,423 | ) | (3,277 | ) | 1,579 | |||||||||||||
Segment assets |
81,800 | 9,713 | 4,556 | 6,136 | 102,205 | |||||||||||||||
Investment in long-lived assets |
20,347 | 356 | 4,208 | | 24,911 |
(1) | Personalized Medicine includes the operations of Arista, which was acquired on July 28, 2010 (see Note 3). |
19
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IRIS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
The Company ships products from two locations in the United States and one location in
Germany. Substantially all long-lived assets are located in the United States. Sales to
international customers amounted to approximately $9.0 million and $9.3 million during the three
months ended March 31, 2011 and 2010, respectively.
Segment assets attributed to corporate unallocated expenses are deferred taxes. Long-lived
assets include property and equipment, intangible assets, long-term portion of inventory and other
long-term assets. Deferred income tax is excluded from long-lived assets.
11. Joint Development Agreement
On March 25, 2011 the Company entered into a Joint Development Agreement with Fujirebio Inc.,
one of the largest in vitro diagnostics companies in Japan, for the co-development of the IRIS
3GEMS(TM) Hematology Analyzer product line.
Terms of the agreement call for Fujirebio to contribute $6.0 million toward the costs of the
joint development program, with an initial payment of $500,000 upon signing of the agreement and
the balance to be paid in installments during the course of the development period based upon the
achievement of certain milestones. These funds will be utilized to accelerate the 3GEMS Hematology
Analyzer development program, which leverages IRISs proprietary image-based technology to automate
the identification and characterization of blood cells, including an image-based expanded white
blood cell differential, and is expected to significantly reduce the need for manual slide
preparation and reviews. The initial payment of $500,000, for work completed to date, was received
in March 2011 and was recorded as a reduction to research and development expenses in the Companys
consolidated statement of operations for the three months ended March 31, 2011.
12. Subsequent Events
The Company considers events or transactions that occur after the balance sheet date but
before the financial statements are issued to provide additional evidence relative to certain
estimates or to identify matters that require additional disclosure. The Company evaluated
subsequent events through the date the financial statements were issued.
20
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Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
Overview
IRIS International, Inc. consists of three operating units in three business segments as
determined in accordance with FASB ASC Topic 280, Segment Reporting. Our in-vitro diagnostics
segment, also called Iris Diagnostics Division (IDD), designs, manufactures and markets systems,
consumables and supplies for urinalysis and body fluids. Our Personalized Medicine segment
combines the research and development operations of our Iris Molecular Diagnostics and Arista
Molecular, Inc. subsidiaries. Under this new segment we consolidate all operations for the
development and commercialization of cancer diagnostic testing services and related products. Our
Sample Processing segment markets small centrifuges and other processing equipment and accessories
for rapid specimen processing, as well as, equipment for fluorescent in-situ hybridization (FISH).
Iris Diagnostics Division
Our core business is in the urinalysis market and we are the leading worldwide provider of
automated urine microscopy systems, with more than 3,100 iQ microscopy analyzers shipped to date in
over 50 countries. We generate revenues primarily from sales of instruments, consumables and
service. Revenues from instruments include global sales of urine microscopy analyzers and sales of
chemistry analyzers. In September 2008, we released our proprietary iChemVELOCITY automated urine
chemistry analyzer and a fully integrated urine microscopy and urine chemistry work-cell, called
the iRICELL in some international markets. In March 2011, we received FDA clearance on our 510(k)
application for these products and commenced selling them in the United States. Historically we
sold our family of iQ analyzers integrated with an automated chemistry analyzer, which we sourced
from a Japanese manufacturer.
Our consumables offering includes products such as chemical reagents, urine test strips,
calibrators and controls. Service revenues are derived primarily from annual service contracts
purchased by our domestic customers after the initial year of sale, which is covered by product
warranty, and spare parts purchased by international customers. Once the analyzers are installed,
we generate recurring revenue from sales of consumables. Consumable and service revenue should
continue to expand as the installed base of related instruments increases.
In the United States, France, Germany, the United Kingdom and Puerto Rico sales of our
urinalysis systems are direct to the end-user through our sales force. All other international
sales are through independent distributors. International sales represented 34% and 36% of
consolidated revenues for the three months ended March 31, 2011 and 2010, respectively. Since the
majority of international sales are made through independent distributors, gross profit margin is
lower than domestic sales of the same products, but we incur minimal sales and marketing costs for
such sales.
Personalized Medicine
On July 28, 2010, we acquired Arista Molecular (Arista), a high complexity
CLIA-certified molecular pathology laboratory offering differentiated, high value molecular
diagnostic services in the rapidly growing field of personalized medicine. Pursuant to the terms
of the merger agreement dated July 26, 2010, we acquired all the issued and outstanding stock for
an amount in cash equal to $4.7 million less certain indebtedness existing at the closing, with an
additional earn-out of up to $1.3 million subject to the achievement of specific sales and earnings
targets through December 2013 (see discussion of gain on revaluation of contingent consideration
below). We did not assume any outstanding options or
warrants in connection with the acquisition. Arista operates under the Personalized Medicine
reporting segment of the consolidated financial statements.
21
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At the time of acquisition, Arista Molecular was an early-stage laboratory with limited
commercial operations. In 2010, we focused the laboratorys efforts to broaden its menu of
diagnostic panels useful for the diagnosis, disease characterization, treatment and monitoring of
cancer. We added testing for breast and prostate solid tumors beyond the existing lung and
colorectal offering. In addition, we now offer flow cytometry for detection and monitoring of
leukemia and lymphoma and FISH testing. Further, we are building the commercial infrastructure of
the laboratory by adding sales and marketing personnel. With the expansion of the test menu and
sales force, we expect the revenue contribution from this segment to become more meaningful in
2011, but continue to have a dilutive impact for the year.
Sample Processing
Our IRIS Sample Processing group markets and develops centrifuges, semi-automated DNA
processing workstations and sample processing consumables. Our StatSpin® brand bench-top
centrifuges are used for specimen preparation in coagulation, cytology, chemistry and urinalysis.
Our worldwide markets include medical institutions, commercial laboratories, clinics, doctors
offices, veterinary laboratories and research facilities. Our Sample Processing products are sold
worldwide primarily through distributors and incorporated into our OEM partners products.
On November 22, 2010, we acquired the assets of a multi-purpose, bench-top instrument platform
for automating highly repetitive, manual laboratory protocols for FISH testing and other
slide-based cytogenetic applications. The product acquisition is a natural extension to the
successful ThermoBrite® DNA Hybridization System and in line with our entry into personalized
medicine with emphasis on cancer diagnostics. The product prototypes and proprietary technology
assets were purchased for $3.2 million in cash from BioMicro Systems, Inc. Although BioMicro
Systems built and tested a working prototype, which proved the technical feasibility of the base
technology, several elements of this technology platform requires continued development in order to
reach salability for its stated purpose.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with U.S.
generally accepted accounting principles and our discussion and analysis of our financial condition
and results of operations require us to make judgments, assumptions, and estimates that affect the
amounts reported in our consolidated financial statements and accompanying notes. We base our
estimates on historical experience and on various other assumptions we believe to be reasonable
under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets and liabilities. We regularly discuss with our audit committee the basis
of our estimates. Actual results may differ from these estimates and such differences may be
material.
A description of our critical accounting policies that represent the more significant
judgments and estimates used in the preparation of our financial statements was provided in the
Managements Discussion and Analysis of Financial Condition and Results of Operations section of
our Annual Report on Form 10-K for the year ended December 31, 2010. There have been no material
changes in these critical accounting policies since December 31, 2010.
22
Table of Contents
Results of Operations
The following table summarizes results of operations data for the periods indicated. The
percentages in the table are based on total revenues, with the exception of percentages for gross
profit margins, which are computed on related revenue, and income taxes, which are based on income
before taxes.
Three months ended | ||||||||||||||||
March 31, | ||||||||||||||||
(in thousands) | ||||||||||||||||
2011 | 2010 | |||||||||||||||
Revenues |
||||||||||||||||
IDD instruments |
$ | 6,538 | 24 | % | $ | 7,889 | 30 | % | ||||||||
IDD consumables and service |
16,744 | 62 | % | 14,391 | 56 | % | ||||||||||
Sample Processing instruments and supplies |
3,594 | 13 | % | 3,700 | 14 | % | ||||||||||
Personalized Medicine services |
63 | 0 | % | | 0 | % | ||||||||||
Total revenues |
26,939 | 100 | % | 25,980 | 100 | % | ||||||||||
Gross profit (1) |
||||||||||||||||
IDD instruments |
2,273 | 35 | % | 2,821 | 36 | % | ||||||||||
IDD consumable and service |
9,369 | 56 | % | 8,436 | 59 | % | ||||||||||
Sample Processing instruments and supplies |
1,924 | 54 | % | 1,997 | 54 | % | ||||||||||
Personalized Medicine services |
(459 | ) | (729 | )% | | 0 | % | |||||||||
Gross profit |
13,107 | 49 | % | 13,254 | 51 | % | ||||||||||
Operating expenses |
||||||||||||||||
Marketing and selling |
5,970 | 22 | % | 4,427 | 17 | % | ||||||||||
General and administrative |
4,802 | 18 | % | 3,737 | 14 | % | ||||||||||
Research and development, net |
3,635 | 13 | % | 3,688 | 14 | % | ||||||||||
Gain on revaluation of contingent consideration |
(1,225 | ) | (5 | )% | | 0 | % | |||||||||
Total operating expenses |
13,182 | 49 | % | 11,852 | 46 | % | ||||||||||
Operating income |
(75 | ) | 0 | % | 1,402 | 5 | % | |||||||||
Other income |
660 | 177 | ||||||||||||||
Income before income taxes |
585 | 2 | % | 1,579 | 6 | % | ||||||||||
Income taxes (2) |
62 | 11 | % | 537 | 34 | % | ||||||||||
Net income |
$ | 523 | 2 | % | $ | 1,042 | 4 | % | ||||||||
(1) | Gross profit margin percentages are based on the related sales of each category. | |
(2) | Income tax percentage is computed based on the relationship of income taxes to pre-tax income. |
Comparison of Three Months Ended March 31, 2011 to Three Months Ended March 31, 2010
Consolidated revenues for the three months ended March 31, 2011 increased 4% to $26.9 million
as compared to $26.0 million in the prior year period. IDD urinalysis segment revenues increased
4% to $23.3 million in the first quarter of 2011 as compared to $22.3 million in the prior year
quarter. IDD instruments revenues decreased 17% to $6.5 million in the first quarter of 2011 as
compared to $7.9 million in the prior year quarter. The decrease in IDD instrument sales is
primarily attributable to promotional discounts offered to domestic customers which bought a
remanufactured version of the predecessor chemistry analyzers prior to FDA clearance of
iChemVELOCITY and iRICELL as well as a decrease in international shipments compared to strong prior
year period instrument sales which were coming off a weak 2009.
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IDD consumables and service revenues increased 16% to a record $16.7 million in the first
quarter of 2011 as compared to $14.4 million in the prior year quarter. The increase in both
consumables and service revenue was driven primarily due to the larger installed base of
instruments both domestically and internationally. In particular, the increase in consumables
reflects the increased sales of iChemVELOCITY strips as a result of the higher utilization and
increased placements of our iChemVELOCITY analyzer in the international market. We expect the trend
in chemistry strips to accelerate now that we are selling the iChemVELOCITY in the domestic market.
Revenues from Sample Processing instruments and supplies decreased 3% to $3.6 million in the
first quarter of 2011 as compared to $3.7 million in the prior year quarter. The decrease was
primarily attributable to lower consumables and service revenue, partially offset by higher
instrument sales.
Personalized Medicine revenues in the first quarter of 2011 totaled $63,000 as we continue to
expand our test menu and build out our sales force. There were no revenues in this segment in the
prior year period as Arista was purchased in July 2010.
Overall gross profit margin was 49% during the first quarter of 2011 compared to 51% in the
prior year quarter. The decrease was due to a decrease in instruments and service margins. Our
consumables and Sample Processing margins were flat quarter-over-quarter.
The gross profit margin of our IDD instruments was 35% in the first quarter of 2011 as
compared to 36% in the prior year quarter. The decrease in instrument margins is primarily due to
a regional sales mix in our international distributor business as we sold more units
proportionately to lower margin regions as compared to the prior year period as well as the
promotional discounts offered to domestic customers prior to attaining FDA clearance on
iChemVELOCITY.
The gross margin of our IDD consumables and services decreased to 56% in the first quarter of
2011 from 59% in the prior year quarter. While consumables margins were flat for the first quarter
of 2011 as compared to the prior year quarter, service margins were lower primarily due to
increased personnel in our worldwide service operation to support our increasing installed base.
Gross profit margin for our Sample Processing segment was 54% during the first quarter of 2011
and the prior year quarter.
Marketing and selling expenses increased to $6.0 million, or 22% of revenues, in the first
quarter of 2011 as compared to $4.4 million, or 17% of revenues, for the first quarter of 2010.
The increase primarily results from $917,000 of expenses related to Arista, which was not in the
prior year period, additional personnel and related costs of $183,000, higher commissions of
$180,000, and increased travel and entertainment expenses of $176,000. The increase in personnel
and related costs is primarily the result of the continued build out, versus the prior year period,
of our direct sales operations in the United Kingdom and Germany in order to support the long-term
strategy of our business.
General and administrative expenses increased to $4.8 million, or 18% of revenues, in the
first quarter of 2011, as compared to and $3.7 million, or 14% of revenues, in the first quarter of
2010. The increase primarily relates to $748,000 of expenses related to Arista, which was not in
the prior year period and an increase in personnel and related cost, outside professional services
and other items of $308,000.
Research and development expenses decreased slightly to $3.6 million, or 13% of revenues in
the first quarter of 2011, as compared to $3.7 million, or 14% of revenues, in the first quarter of
2010. The first quarter of 2011 R&D expense includes a $500,000 payment from Fujirebio related to
our joint development agreement on the 3GEMS Hematology Analzyer which offsets research and
development expenditures for this product. Expenses related to our NADiA platform decreased by
$245,000 in the first quarter of 2011 as compared to the prior year period as we incurred costs in the prior year
quarter associated with preparing our 510(k) submission of our prostate cancer test, NADiA ProsVue
to the FDA.
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Gain on revaluation of contingent consideration of $1.2 million recorded in the first quarter
of 2011 is the result of the reduction in the fair value of the contingent consideration obligation
associated with acquisition of Arista. As a result of significant revenue shortfalls at Arista
relative to previous projections for the three months ended March 31, 2011, sales projections for
Arista were significantly reduced for all future periods. The revised forecast projected revenues
are significantly below targets for all three years covered by the earn-out period. Management thus
determined that the fair value contingent consideration obligation was zero, which resulted in a
decrease of $1.2 million from December 31, 2010 to March 31, 2011. Consequently the Company
recognized a gain on revaluation of contingent consideration for the three months ended March 31,
2011.
Interest income increased during the first quarter of 2011 to $277,000 from $236,000 during
the first quarter of 2010, due primarily to an increase in sales type leases.
Foreign exchange gains and other totaled $385,000 for the first quarter of 2011 as compared to
a $57,000 loss in the prior year period, primarily resulting from the effect of favorable foreign
currency fluctuations on U.S. dollar denominated intercompany balances.
Income tax during the first quarter of 2011 amounted to a provision of 11% of pre-tax income
as compared to 34% during the prior year period. The lower tax rate reflects the effects of
permanent differences such as the gain on revaluation of contingent consideration which is not
taxable for federal and state income tax purposes, as well as the impact of federal and state
research and development tax credits, relative to the amounts of income projected for the year.
Liquidity and Capital Resources
Our primary source of liquidity is cash from operations, which depends heavily on sales of our
IDD instruments, consumables and service, as well as sales of sample processing instruments and
supplies. At March 31, 2011, our cash and cash equivalents amounted to $24.6 million compared to
$25.5 million at December 31, 2010.
In the past few years, we have faced adverse macro economic forces, which have impacted our
selling markets and the credit markets of our customers. At this point the impact from these
forces are relatively mild, but in the future we may face the following challenges: deferrals of
purchases due to decreases in capital budgets of our customers, delays in the purchasing cycle due
to greater scrutiny of deals and increased internal competition for limited capital dollars, and an
increase in requests for quotes for operating leases. The aforementioned factors may lead to a
decrease in revenue, an increase of deferred revenue, or could lead to installment cash collection.
Operating Cash Flows. Cash provided by operations for the three months ended March 31, 2011
was $1.7 million, which included $1.3 million in cash generated from net earnings from operations
including the effect of adjusting for non-cash items and an increase in operating liabilities of
$2.1 million, partially offset by a $1.2 million increase in inventory and a $0.5 million increase
in other current assets.
As of March 31, 2011, the number of days sales in accounts receivable increased to 71 days
compared to 65 days for the prior year first quarter. The number of days sales in accounts
receivable varies and may increase with extended payment terms to our international distributors
and end users.
Investing Activities. Cash used in investing activities totaled $2.7 million in the
three months ended March 31, 2011 as compared to $1.0 million in the prior year period, primarily
due to increased purchases of property and equipment resulting from an investment in leasehold improvements for
the Companys new research and development facility located in Chatsworth, CA.
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Financing Activities. Cash used in financing activities totaled $108,000 in the
three months ended March 31, 2011 compared to $93,000 in the prior year perod. Financing
activities in both periods were primarily composed of settlement on restricted stock tax
withholding.
We currently have a credit facility with a commercial bank consisting of a $6.5 million
revolving line of credit for working capital and a $10.0 million line of credit for acquisitions
and product opportunities. The credit facility has variable interest rates, which will change from
time to time based on changes to either the LIBOR rate or the lenders prime rate. As of March 31,
2011, there were no borrowings under the credit facility. We are subject to certain financial and
non-financial covenants under the credit facility with the bank and as of March 31, 2011, we were
in compliance with these covenants.
We believe that our current cash on hand, together with cash generated from operations and
cash available under the credit facility with the bank will be sufficient to fund normal operations
for the foreseeable future. However, additional funding may be required to fund expansion of our
business. There is no assurance that such funding will be available on terms acceptable to us.
Off-Balance Sheet Arrangements
At March 31, 2011 and 2010, we did not have any relationships with unconsolidated entities or
financial partnerships, such as entities often referred to as structured finance or special purpose
entities, which would have been established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any
financing, liquidity, market or credit risk that could arise if we had engaged in such
relationships.
Recent Accounting Pronouncements
In April, 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Update (ASU) ASU 2011-02, Receivables: A Creditors Determination of Whether a Restructuring is a
Troubled Debt Restructuring. ASU 2011-02 provides guidance on whether a restructuring constitutes
a troubled debt restructuring. For public entities, the ASU is effective for the first interim or
annual period beginning on or after June 15, 2011, and should be applied retrospectively to the
beginning of the annual period of adoption. For purposes of measuring impairment of those
receivables, an entity should apply the amendments prospectively for the first interim or annual
period beginning on or after June 15, 2011. For nonpublic entities, the ASU is effective for
annual periods ending on or after December 15, 2012, including interim periods within those annual
periods. Early adoption is permitted. We do not expect the adoption of ASU 2011-02 to have a
material impact on our financial statements.
In December 2010, the FASB issued ASU 2010-29, Business Combinations- Disclosure of
Supplementary Pro Forma Information, which specifies that if a public entity presents comparative
financial statements, the entity should disclose revenue and earnings of the combined entity as
though the business combination(s) that occurred during the current year had occurred as of the
beginning of the comparable prior annual reporting period only.
ASU 2010-29 is effective on a prospective basis for business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on or
after December 15, 2010 with early adoption permitted. The adoption of ASU 2010-29 did not have a
material impact on our financial statements.
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In December 2010, the FASB issued ASU No. 2010-28When to Perform Step 2 of the Goodwill
Impairment Test for Reporting Units with Zero or Negative Carrying Amounts. This update provides
amendments to ASC Topic 350Intangibles, Goodwill and Other that requires an entity to perform
Step 2 impairment test even if a reporting unit has zero or negative carrying amount. Step 1 tests
whether the carrying amount of a reporting unit exceeds its fair value. Previously reporting units
with zero or negative carrying value passed Step 1 because the fair value was generally greater
than zero. Step 2 requires impairment testing and impairment valuation be calculated in between
annual tests if an event or circumstances indicate that it is more likely than not that goodwill
has been impaired. ASU 2010-28 is effective beginning January 1, 2011. As a result of this
standard, goodwill impairments may be reported sooner than under current practice. The adoption of
ASU 2010-28 did not have a material impact on our financial statements.
In April 2010, the FASB issued ASU 2010-17, Milestone Method of Revenue Recognition, provides
guidance on defining a milestone and determining when it may be appropriate to apply the milestone
method of revenue recognition for research and development transactions. It is effective on a
prospective basis for milestones achieved in fiscal years, and interim periods within those years,
beginning on or after June 15, 2010. Early adoption is permitted. The adoption of the ASU 2010-17
did not have a material impact on our consolidated financial statements.
In October 2009, the FASB issued ASU 2009-14, Certain Revenue Arrangements That Include
Software Elements, now codified under FASB ASC Topic 985, Software. ASU 2009-14, removes tangible
products from the scope of software revenue guidance and provides guidance on determining whether
software deliverables in an arrangement that includes a tangible product are covered by the scope
of the software revenue guidance. ASU 2009-14 is to be applied on a prospective basis for revenue
arrangements entered into or materially modified in fiscal years beginning on or after June 15,
2010, with early adoption permitted. The adoption of the ASU 2009-14 did not have a material impact
on our consolidated financial statements.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Market Risk
Our business is exposed to various market risks, including changes in interest rates and
foreign currency exchange rates. Market risk is the potential loss arising from adverse changes in
market rates and prices, such as interest rates and foreign currency exchange rates. We do not
invest in derivatives, foreign currency forward contracts or other financial instruments for
trading or speculative purposes. We had no debt at March 31, 2011, thus were not subject to market
risk for changes in interest rates on debt obligations. We are subject to market risk for changes
in interest rates on our short-term investment portfolio. We invest our excess cash in certificates
of deposit and, on occasion, other short-term investments, and the market value of these
investments fluctuates based on changes in interest rates.
Foreign Currencies
We conduct business in certain foreign markets, primarily in the European Union and Asia. Our
primary exposure to foreign currency risk relates to investments in foreign subsidiaries that
transact business in a functional currency other than the U.S. Dollar, primarily the Euro and
British Pound. We are subject to certain foreign currency risks in the importation of goods from
Japan and as a result of commercial operations in Europe and Asia. Our consumables purchases from
a major Japanese IVD supplier are denominated in Japanese Yen. The impact from fluctutation in the
Yen should decrease over time, as we now sell our own chemistry analyzer into the domestic market.
All of our sales are denominated in U.S. Dollars with the exception of France, Germany, United Kingdom and Ireland,
where sales are denominated in Euros and British Pound. Fluctuations in the U.S. Dollar exchange
rate for Japanese Yen, Euro and British Pound could result in increased costs for our key
components and increased costs for commercial operations in Europe.
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Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined by paragraph (e) of Rules 13a-15(f)
or 15d-15(f) under the Securities and Exchange Act of 1934, as amended, designed to ensure that we
are able to collect the information we are required to disclose in the reports we file with the SEC
and to approve, summarize and disclose this information within the time periods specified in the
rules of the SEC. Our Chief Executive Officer and Chief Financial Officer are responsible for
establishing and maintaining these procedures, and, as required by the rules of the SEC, evaluate
their effectiveness. Our Chief Executive Officer and Chief Financial Officer evaluated the
effectiveness of our disclosure controls and procedures as of March 31, 2011, the end of the period
covered by this report, and based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures are effective.
Changes in Internal Controls over Financial Reporting
There was no change in our internal control over financial reporting during the quarter ended
March 31, 2011 that materially affected, or is reasonable likely to materially affect, our internal
control over financial reporting.
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PART II: OTHER INFORMATION
Item 1A. | Risk Factors |
This Quarterly Report on Form 10-Q contains forward-looking statements, which are subject to a
variety of risks and uncertainties. Other actual results could differ materially from those
anticipated in those forward-looking statements as a result of various factors, including those set
forth in the risk factors relating to our business and common stock contained in Item 1A of our
Annual Report on Form 10-K for the year ended December 31, 2010. There have been no material
changes to such risk factors during the three months ended March 31, 2011.
Item 6. | Exhibits |
Exhibit | Reference | |||
Number | Description | Document | ||
10.1 |
Fourth Amendment to Key Employee Agreement for César M. Garcia effective March 30, 2011 between IRIS International, Inc. and César M. Garcia. | (1) | ||
10.2 |
First Amendment to Key Employee Agreement for Amin Khalifa effective March 30, 2011 between IRIS International, Inc. and Amin Khalifa. | (2) | ||
10.3 |
Second Amendment to Key Employee Agreement for John Yi effective March 30, 2011 between IRIS International, Inc. and John Yi. | (3) | ||
10.4 |
Second Amendment to Key Employee Agreement for Tom Warekois effective March 30, 2011 between IRIS International, Inc. and Tom Warekois. | (4) | ||
10.5 |
Second Amendment to Key Employee Agreement for Robert Mello effective March 30, 2011 between IRIS International, Inc. and Robert Mello. | (5) | ||
10.6 |
First Amendment to Key Employee Agreement for Thomas H. Adams, Ph.D effective March 30, 2011 between IRIS International, Inc. and Thomas H. Adams, Ph.D. | (6) | ||
10.7 |
Amendment to Key Employee Agreement for Vance Randal White effective March 30, 2011 between IRIS International, Inc. and Vance Randal White. | (7) | ||
10.8 |
Amendment to Key Employee Agreement for Philip Ginsburg effective March 30, 2011 between IRIS International, Inc. and Philip Ginsburg. | (8) | ||
31.1 |
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer | * |
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Exhibit | Reference | |||
Number | Description | Document | ||
31.2 |
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer | * | ||
32.1 |
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer | * | ||
32.2 |
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer | * |
* | Filed herewith | |
| A management contract or compensatory plan or arrangement. | |
(1) | Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K, filed April 5, 2011. | |
(2) | Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K, filed April 5, 2011. | |
(3) | Incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K, filed April 5, 2011. | |
(4) | Incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K, filed April 5, 2011. | |
(5) | Incorporated by reference to Exhibit 10.5 to Current Report on Form 8-K, filed April 5, 2011. | |
(6) | Incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K, filed April 5, 2011. | |
(7) | Incorporated by reference to Exhibit 10.7 to Current Report on Form 8-K, filed April 5, 2011. | |
(8) | Incorporated by reference to Exhibit 10.8 to Current Report on Form 8-K, filed April 5, 2011. |
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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.
Date: May 10, 2011 | IRIS INTERNATIONAL, INC. |
|||
By: | /s/ César M. García | |||
César M. García | ||||
Chairman, President and Chief Executive Officer |
||||
By: | /s/ Amin I. Khalifa | |||
Amin I. Khalifa | ||||
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
||||
31