Form 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 


 

FORM 8-K

 


 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

 

February 13, 2006

Date of Report (date of earliest event reported)

 


 

CUTERA, INC.

(Exact name of Registrant as specified in its charter)

 


 

Delaware   000-50644   77-0492262

(State or other jurisdiction of

incorporation or organization)

  (Commission File Number)  

(I.R.S. Employer

Identification Number)

 

3240 Bayshore Blvd.

Brisbane, California 94005

(Address of principal executive offices)

 

(415) 657-5500

(Registrant’s telephone number, including area code)

 

N/A

(Former name or former address, if changed since last report)

 


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 



Item 2.02. Results of Operations and Financial Condition.

 

On February 13, 2006, we are issuing a press release and holding a conference call regarding our financial results for the fourth quarter of fiscal year 2005 ended December 31, 2005. A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K.

 

This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01. Financial Statements and Exhibits.

 

  (c) Exhibits.

 

Exhibit No.

 

Description


99.1   Press Release of Cutera, Inc. dated as of February 13, 2006.


SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    CUTERA, INC.
Date: February 13, 2006   By:  

/s/ Kevin P. Connors


        Kevin P. Connors
        President and Chief Executive Officer
Press Release

Exhibit 99.1

 

LOGO

 

FOR IMMEDIATE RELEASE

 

CONTACTS:

 

Cutera, Inc.

Ron Santilli

Chief Financial Officer

415-657-5500

 

Investor Relations

John Mills

Integrated Corporate Relations, Inc.

310-395-2215

jmills@icrinc.com

 

CUTERA ACHIEVES RECORD REVENUE AND EARNINGS GROWTH IN FOURTH

QUARTER AND YEAR ENDED DECEMBER 31, 2005

 

Brisbane, California, February 13, 2006 – Cutera, Inc. (Nasdaq: CUTR), a leading provider of laser and other light-based aesthetic systems for practitioners worldwide, today reported financial results for the fourth quarter and year ended December 31, 2005. Key financial highlights are as follows:

 

Fourth quarter 2005, compared with the same quarter in 2004:

 

  Revenue increased by 49% from $16.1 million to $24.0 million

 

  Operating margins improved from 17% to 29%

 

  Earnings per diluted share climbed from $0.16 to $0.41

 

  Cash generated by operations improved from $3.9 million to $7.6 million

 

Full year 2005, compared with full year 2004:

 

  Revenue increased by 44% from $52.6 million to $75.6 million

 

  Operating margins improved from 10% to 22%

 

  Earnings per diluted share climbed from $0.31 to $1.00

 

  Cash generated by operations more than doubled, from $9.2 million to $20.4 million

 

  Cash and marketable investments increased by $25.7 million from $66.3 to $92.0 million.

 

“These impressive results are attributable to the positive reception that our products have been receiving in the marketplace and to the expansion of our sales force,” said Kevin Connors, President and Chief Executive Officer. “In 2005, we experienced significant financial leverage in our business model. We increased gross margins and decreased each of our operating expenses, as a percent of revenue.

 

“We remain committed to aggressively investing in our business to exploit the growth opportunities in this robust market. Specifically, we are focused on the following key initiatives, which are yielding measurable returns as proven by our results in 2005: (i) worldwide sales force


expansion- we ended 2005 with 47 direct sales territories in North America, up from 32 territories at the end of 2004; (ii) new aesthetic solutions and product introductions; and, (iii) marketing to the broad and expanding market of physicians outside of the traditional dermatology and plastic surgery physician specialties, including the emerging medi-spa market. That market is comprised of physicians who offer aesthetic treatments in a spa environment.”

 

Revenue highlights for the full year 2005, compared with the full year 2004, are as follows:

 

  U.S. and international revenue increased by 57% and 19%, respectively.

 

  Product revenue grew by 46%, primarily due to our premium multi-application Xeo product and the newly introduced Solera platform products.

 

  Service revenue increased by 60%, primarily due to the sales of post-warranty service contracts to an increasing number of customers.

 

  Revenue from Titan refills- an annuity business line introduced in late 2004 - contributed $1.8 million in 2005.

 

Mr. Connors concluded, “We are very pleased with the results of our key initiatives. Our strong financial position, together with the fast-paced growth of our company, strategically position Cutera as a leading global provider of light-based aesthetic systems.”

 

Guidance

 

The following is management’s guidance excluding and including the impact of adopting SFAS 123(R):

 

     Impact of Expensing Employee Stock Options-SFAS 123(R)

     Three months ended 3/31/2006

   Year Ended 12/31/2006

     Including

   Excluding

   Including

   Excluding

Revenue

   $ 19,000    $ 19,000    $ 94,300    $ 94,300

Stock-based compensation

   $ 1,000    $ 230    $ 4,500    $ 940

Net Income

   $ 1,110    $ 1,580    $ 12,330    $ 14,490

Diluted EPS

   $ 0.08    $ 0.11    $ 0.85    $ 1.00

 

Effective January 1, 2006, Cutera will be adopting Statement of Financial Accounting Standards (SFAS) No. 123(R), which requires the Company to begin recognizing compensation expense relating to share-based payment transactions in the Statement of Operations. In the above guidance, for the benefit of investors, management has provided summary non-GAAP information that is consistent and comparable with the company’s historical performance. A table reconciling the non-GAAP financial measure of excluding the impact of SFAS 123(R), to the appropriate GAAP measure, is included in the condensed consolidated financial statements attached to this release.

 

Conference Call

 

Cutera, Inc. will host a conference call on February 13, 2006, at 2:00 p.m. PST (5:00 p.m. EST) to discuss its fourth-quarter and year-ended 2005 results. The earnings call will be broadcast live over the internet hosted at the Investor Relations section of the company’s website at http://www.cutera.com and will be archived online within one hour of the completion of the conference call. In addition, you may dial 800-811-8824 to access that call. Participating in the call will be Kevin Connors, President and Chief Executive Officer, and Ron Santilli, Chief Financial Officer.


A telephonic playback of this call will be available from 5:00 p.m. PST on February 13, 2006, through 9:00 p.m. PST on February 27, 2006 by calling 888-203-1112. International callers may call 719-457-0820. To access this playback, please enter pass code 6044919.

 

About Cutera, Inc.

 

Brisbane, California-based Cutera is a leading provider of laser and other light-based aesthetic systems to the professional aesthetic market. Since 1998, Cutera has been developing innovative, easy-to-use products that enable dermatologists, plastic surgeons, gynecologists, primary care physicians and other qualified practitioners to offer safe, effective and non-invasive aesthetic treatments to their patients. For more information, call 1-888-4CUTERA or visit www.cutera.com

 

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Specifically, statements concerning Cutera’s ability to continue to rapidly grow its business, its ability to successfully carry out key initiatives for 2006, including sales force expansion, introduction of new aesthetic solutions and product introductions, and broadening of its customer base, as well as Cutera’s financial guidance for the first quarter and fiscal year 2006, are forward-looking statements within the meaning of the Safe Harbor. Forward-Looking statements are based on management’s current, preliminary expectations and are subject to risks and uncertainties, which may cause Cutera’s actual results to differ materially from the statements contained herein. Cutera’s fourth quarter and year ended December 31, 2005 financial performance, as discussed in this release, are preliminary and unaudited, and subject to adjustment. Estimates for the first quarter and fiscal year 2006 financial performance are subject to a number of assumptions regarding the future operation of our business. Further information on potential risk factors that could affect Cutera’s business and its financial results are detailed in its most recent 10-K and 10-Q as filed with the Securities and Exchange Commission. Undue reliance should not be placed on forward–looking statements, especially guidance on future financial performance, which speaks only as of the date they are made. Cutera undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date they were made, or to reflect the occurrence of unanticipated events.

 

—Financial Tables Follow—


CUTERA, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

 

     December 31,

 
     2005

    2004

 

Assets

                

Current assets:

                

Cash and cash equivalents

   $ 5,260     $ 7,070  

Marketable investments

     86,736       59,200  

Accounts receivable, net

     6,478       6,643  

Inventory

     5,245       3,004  

Deferred tax asset

     3,027       2,284  

Other current assets

     3,728       878  
    


 


Total current assets

     110,474       79,079  

Property and equipment, net

     1,015       1,071  

Intangibles, net

     469       399  
    


 


Total assets

   $ 111,958     $ 80,549  
    


 


Liabilities and Stockholders’ Equity

                

Liabilities:

                

Accounts payable

   $ 1,352     $ 1,195  

Accrued liabilities

     9,131       8,194  

Deferred revenue

     1,673       1,171  
    


 


Total current liabilities

     12,156       10,560  

Deferred rent

     1,096       648  

Deferred revenue, net of current portion

     1,469       833  

Deferred tax liability

     60       52  
    


 


Total liabilities

     14,781       12,093  
    


 


Stockholders’ equity:

                

Common stock

     12       11  

Additional paid-in capital

     77,705       62,738  

Deferred stock-based compensation

     (2,171 )     (2,226 )

Retained earnings

     21,743       7,942  

Other comprehensive loss

     (112 )     (9 )
    


 


Total stockholders’ equity

     97,177       68,456  
    


 


Total liabilities and stockholders’ equity

   $ 111,958     $ 80,549  
    


 



CUTERA, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

    

Three Months Ended

December 31,


   

Year Ended

December 31,


 
     2005

    2004

    2005

    2004

 

Net revenue

   $ 23,953     $ 16,094     $ 75,620     $ 52,641  

Cost of revenue(1)

     6,149       4,235       19,792       14,689  
    


 


 


 


Gross profit

     17,804       11,859       55,828       37,952  

Operating expenses:

                                

Sales and marketing

     7,106       5,473       24,801       19,052  

Research and development

     1,374       1,150       5,065       4,136  

General and administrative

     2,164       2,195       7,983       8,344  

Amortization of stock-based compensation(2)

     207       313       1,307       1,267  
    


 


 


 


Total operating expenses

     10,851       9,131       39,156       32,799  
    


 


 


 


Income from operations

     6,953       2,728       16,672       5,153  

Interest and other income, net

     683       378       2,034       632  
    


 


 


 


Income before income taxes

     7,636       3,106       18,706       5,785  

Provision for income taxes

     (1,825 )     (1,034 )     (4,905 )     (2,025 )
    


 


 


 


Net income

   $ 5,811     $ 2,072     $ 13,801     $ 3,760  
    


 


 


 


Net income per diluted share

   $ 0.41     $ 0.16     $ 1.00     $ 0.31  
    


 


 


 


Weighted-average number of shares used in diluted per share calculations

     14,291       13,167       13,864       12,222  
    


 


 


 


 


                                

(1) Cost of revenue includes amortization of stock-based compensation of:

   $ 33     $ 39     $ 135     $ 168  
    


 


 


 


(2) Amortization of stock-based compensation is attributable to the following operating expense categories:

                                

Sales and marketing

     61       63       220       274  

Research and development

     47       104       288       413  

General and administrative

     99       146       799       580  
    


 


 


 


       207       313       1,307       1,267  
    


 


 


 


Total amortization of stock-based compensation

   $ 240     $ 352     $ 1,442     $ 1,435  
    


 


 


 



CUTERA, INC.

 

CONSOLIDATED REVENUE HIGHLIGHTS

(in thousands, except percentage data)

(unaudited)

 

     Three Months Ended December 31,

    Year Ended December 31,

 
     2005

   2004

   Change

    2005

   2004

   Change

 
     $

   $

   %

    $

   $

   %

 

Revenue By Geography:

                                        

United States

   $ 18,274    $ 10,894    +68 %   $ 54,506    $ 34,824    +57 %

International

     5,679      5,200    +9 %     21,114      17,817    +19 %
    

  

  

 

  

  

     $ 23,953    $ 16,094    +49 %   $ 75,620    $ 52,641    +44 %
    

  

  

 

  

  

Revenue By Product Category:

                                        

Products

   $ 19,939    $ 13,325    +50 %   $ 63,349    $ 43,525    +46 %

Product upgrades

     2,060      2,038    +1 %     6,630      6,615    0 %

Service

     1,222      659    +85 %     3,881      2,429    +60 %

Titan refills

     732      72    +917 %     1,760      72    +2344 %
    

  

  

 

  

  

     $ 23,953    $ 16,094    +49 %   $ 75,620    $ 52,641    +44 %
    

  

  

 

  

  

 

CUTERA, INC.

 

Reconciliations of Non-GAAP guidance measures to the nearest comparable GAAP guidance measures

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended 3/31/2006

   Year Ended 12/31/2006

     GAAP
Guidance


   Adjustment

    Non-GAAP
Guidance


   GAAP
Guidance


   Adjustment

    Non-GAAP
Guidance


Revenue

   $ 19,000            $ 19,000    $ 94,300            $ 94,300
    

          

  

          

            $ 770 (a)                 $ 3,560 (a)      

Net income

   $ 1,110    $ (300 )(b)   $ 1,580    $ 12,330    $ (1,400 )(b)   $ 14,490
    

  


 

  

  


 

Net income per diluted share

   $ 0.08    $ 0.03     $ 0.11    $ 0.85    $ 0.15     $ 1.00
    

  


 

  

  


 


(a)— To eliminate incremental stock-based compensation charges resulting from adopting SFAS 123(R) with effect from January 1, 2006.
(b)— To eliminate the tax benefit related to the incremental stock-based compensation charges resulting from adopting SFAS 123(R) with effect from January 1, 2006.


CUTERA, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

     Year Ended December 31,

 
     2005

    2004

 

Cash flows from operating activities:

                

Net income

   $ 13,801     $ 3,760  

Adjustments to reconcile net income to net cash provided by operating activities:

                

Depreciation and amortization

     689       524  

Change in allowance for doubtful accounts

     (311 )     293  

Change in excess and obsolete inventory

     614       300  

Change in deferred tax asset/liability

     (735 )     (476 )

Stock-based compensation

     1,442       1,435  

Tax benefit related to employee stock options

     7,437       674  

Loss on disposal of assets

     —         47  

Changes in assets and liabilities:

                

Accounts receivable

     476       661  

Inventory

     (2,855 )     (1,065 )

Other current assets

     (2,850 )     1  

Accounts payable

     157       (720 )

Accrued liabilities

     937       2,485  

Deferred rent

     448       648  

Deferred revenue

     1,138       677  
    


 


Net cash provided by operating activities

     20,388       9,244  
    


 


Cash flows from investing activities:

                

Acquisition of property and equipment

     (539 )     (854 )

Purchase of intangibles

     (165 )     —    

Proceeds from sales of marketable investments

     18,324       9,133  

Proceeds from maturities of marketable investments

     49,948       14,310  

Purchase of marketable investments, net

     (95,910 )     (82,652 )

Change in restricted cash

     —         250  
    


 


Net cash used in investing activities

     (28,342 )     (59,813 )
    


 


Cash flows from financing activities:

                

Proceeds from exercise of stock options and employee stock purchase plan

     6,144       1,037  

Proceeds from issuance of common stock, net

     —         46,312  
    


 


Net cash provided by financing activities

     6,144       47,349  
    


 


Net decrease in cash and cash equivalents

     (1,810 )     (3,220 )

Cash and cash equivalents at beginning of year

     7,070       10,290  
    


 


Cash and cash equivalents at end of year

   $ 5,260     $ 7,070  
    


 


Supplemental and non-cash disclosure of cash flow information:

                

Conversion of preferred stock to common stock

   $ —       $ 7,372  

Change in deferred stock-based compensation, net of terminations

   $ 1,387     $ (227 )

Cash paid for income taxes

   $ 1,837     $ 2,526