Stratasys Reports Record Quarterly Financial Results

Financial Tables & Non-GAAP Discussion

The information discussed within this release includes financial results that are in accordance with accounting principles generally accepted in the United States (GAAP). In addition, certain non-GAAP financial measures have been provided that exclude certain charges, expenses and income. The non-GAAP measures should be read in conjunction with the corresponding GAAP measures and should be considered in addition to, and not as an alternative or substitute for, the measures prepared in accordance with GAAP. The non-GAAP financial measures are provided in an effort to provide information that investors may deem relevant to evaluate results from the company’s core business operations and to compare the company’s performance with prior periods. The non-GAAP financial measures primarily identify and exclude certain discrete items, such as the warrant charge, restructuring expenses, and expenses associated with stock-based compensation required under ASC 718. The company uses these non-GAAP financial measures for evaluating comparable financial performance against prior periods.

This release is also available on the Stratasys Web site at www.Stratasys.com.

STRATASYS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

                 
 

Three Months Ended September 30,

 

Nine Months Ended September 30,

2011   2010 2011   2010
    (unaudited)   (unaudited) (unaudited)   (unaudited)
 
Net sales
Products $ 32,255,554 $ 23,966,937 $ 90,521,228 $ 69,526,507
Services 7,440,470 6,291,609 21,048,816 18,785,660
Fair value of warrant related to OEM agreement   -     -     -     (4,987,806 )
39,696,024 30,258,546 111,570,044 83,324,361
 
Cost of sales
Products 14,868,919 12,695,679 42,647,905 35,805,842
Services   3,273,159     2,853,879     9,382,333     8,627,451  
18,142,078 15,549,558 52,030,238 44,433,293
       
Gross profit 21,553,946 14,708,988 59,539,806 38,891,068

 

 

Operating expenses
Research and development 3,613,668 2,242,263 10,687,578 7,191,594
Selling, general and administrative   10,083,451     8,403,902     28,738,326     24,385,683  
13,697,119 10,646,165 39,425,904 31,577,277
       
Operating income 7,856,827 4,062,823 20,113,902 7,313,791
 
Other income (expense)
Interest income, net 276,089 217,651 698,469 596,541
Foreign currency transaction losses, net (217,857 ) 227,623 (429,840 ) (570,184 )
Other, net   755,030     48,078     2,264,307     42,093  
813,262 493,352 2,532,936 68,450
       
Income before income taxes 8,670,089 4,556,175 22,646,838 7,382,241
 
Income tax expense   2,812,920     1,380,625     7,806,524     2,317,635  
 
Net income $ 5,857,169   $ 3,175,550   $ 14,840,314   $ 5,064,606  
 
Earnings per common share
Basic $ 0.28   $ 0.15   $ 0.70   $ 0.25  
Diluted $ 0.27   $ 0.15   $ 0.68   $ 0.24  
 

Weighted average number of common shares outstanding

Basic   21,165,401     20,586,695     21,107,474     20,519,189  
Diluted   21,542,674     21,000,804     21,669,848     21,035,559  
 

STRATASYS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

         
    September 30,
2011
(unaudited)
  December 31,
2010
   
ASSETS
 
Current assets
Cash and cash equivalents $ 15,231,778 $ 27,554,411
Short-term investments - held to maturity 3,047,213 8,797,878

Accounts receivable, less allowance for doubtful accounts of $1,154,709 at September 30, 2011 and $1,094,588 at December 31, 2010

23,766,474 20,051,451
Inventories 21,983,920 17,880,714

Net investment in sales-type leases, less allowance for doubtful accounts of $245,332 at September 30, 2011 and $189,338 at December 31, 2010

2,911,027 3,096,911
Prepaid expenses and other current assets 4,660,515 3,384,394
Deferred income taxes   3,826,000     3,447,000  
Total current assets   75,426,927     84,212,759  
 
Property and equipment, net   37,828,246     29,872,945  
 
Other assets
Goodwill 25,055,948 867,700
Other Intangible assets, net 25,930,787 5,538,014
Net investment in sales-type leases 4,274,110 3,067,446
Long-term investments - available for sale - 1,185,250
Long-term investments - held to maturity 42,652,402 52,504,650
Other non-current assets   172,490     1,210,867  
Total other assets   98,085,737     64,373,927  
 
Total assets $ 211,340,910   $ 178,459,631  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities
Accounts payable and other current liabilities $ 15,499,809 $ 14,408,628
Unearned revenues   12,266,830     11,561,521  
Total current liabilities   27,766,639     25,970,149  
 
Non-current liabilities
Deferred tax liabilities   7,519,500     207,000  
 
Total liabilities   35,286,139     26,177,149  
 
Commitments and contingencies
 
Stockholders' equity

Common stock, $.01 par value, authorized 30,000,000 shares; 26,857,801 and 26,509,518 issued as of September 30, 2011 and December 31, 2010, respectively

268,578 265,095
Additional paid-in capital 116,544,175 107,781,990
Retained earnings 98,225,797 83,385,484
Accumulated other comprehensive loss 20,646 (145,662 )

Treasury stock at cost, 5,687,631 shares as of September 30, 2011 and December 31, 2010

  (39,004,425 )   (39,004,425 )
Total stockholders' equity   176,054,771     152,282,482  
 
Total liabilities and stockholders' equity $ 211,340,910   $ 178,459,631  
 
STRATASYS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP TO GAAP RESULTS OF OPERATIONS
   
  Non-GAAP Adjustments for the Three Months Ended September 30, 2011         Non-GAAP Adjustments for the Three Months Ended September 30, 2010
    Consolidated
(unaudited)
As Reported
  Stock-Based
Compensation (1)
  Sale of Auction
Rate Security (2)
  Consolidated
(unaudited)
Non-GAAP
Consolidated
(unaudited)
As Reported
  Stock-Based
Compensation (1)
  Consolidated
(unaudited)
Non-GAAP
         
Gross profit   21,553,946     -       -       21,553,946     14,708,988     -       14,708,988
 
Selling, general and administrative expenses   10,083,451     (440,829 )     -       9,642,622     8,403,902     (310,544 )     8,093,358
 
Total operating expenses   13,697,119     (440,829 )     -       13,256,290     10,646,165     (310,544 )     10,335,621
 
Operating income   7,856,827     440,829       -       8,297,656     4,062,823     310,544       4,373,367
 
Other income   813,262     -       (626,188 )     187,074     493,352     -       493,352
 
Income before income taxes 8,670,089 440,829 (626,188 ) 8,484,730 4,556,175 310,544 4,866,719
Income tax expense   2,812,920     95,585       (232,253 )     2,676,252     1,380,625     48,288       1,428,913
 
Net income $ 5,857,169 $ 345,244 $ (393,935 ) $ 5,808,478 $ 3,175,550 $ 262,256 $ 3,437,806
 
Earnings per common share
Basic $ 0.28   $ 0.02     $ (0.02 )   $ 0.27   $ 0.15   $ 0.01     $ 0.17
Diluted $ 0.27   $ 0.02     $ (0.02 )   $ 0.27   $ 0.15   $ 0.01     $ 0.16
 

Weighted average number of common shares outstanding

Basic   21,165,401             21,165,401     20,586,695         20,586,695
Diluted   21,542,674             21,542,674     21,000,804         21,000,804
 
 
                                       
Non-GAAP Adjustments for the Nine Months Ended September 30, 2011 Non-GAAP Adjustments for the Nine Months Ended September 30, 2010
    Consolidated
(unaudited)
As Reported
  Stock-Based
Compensation (1)
  Sale of Auction
Rate Security (2)
  Sale of Equity
Investment (3)
  Solidscape
Acquisition (4)
  Solidscape
Inventory
Revaluation (5)
  Consolidated
(unaudited)
Non-GAAP
Consolidated
(unaudited)
As Reported
  Stock-Based
Compensation (1)
  Fair Value
of Warrant (6)
  Consolidated
(unaudited)
Non-GAAP
 
 
Net sales $ 111,570,044   $ -     $ -     $ -     $ -     $ -     $ 111,570,044 $ 83,324,361   $ -     $ 4,987,806   $ 88,312,167
 
Cost of sales   52,030,238     -       -       -       -       (561,094 )     51,469,144   44,433,293     -       -     44,433,293
 
Gross profit   59,539,806     -       -       -       -       561,094       60,100,900   38,891,068     -       4,987,806     43,878,874
 
Selling, general and administrative expenses   28,738,326     (1,088,025 )     -       -       (615,332 )     -       27,034,969   24,385,683     (931,632 )     -     23,454,051
 
Total operating expenses   39,425,904     (1,088,025 )     -       -       (615,332 )     -       37,722,547   31,577,277     (931,632 )     -     30,645,645
 
Operating income   20,113,902     1,088,025       -       -       615,332       561,094       22,378,353   7,313,791     931,632       4,987,806     13,233,229
 
Other income   2,532,936     -       (626,188 )     (1,204,408 )     -       -       702,340   68,450     -       -     68,450
 
Income before income taxes 22,646,838 1,088,025 (626,188 ) (1,204,408 ) 615,332 561,094 23,080,693 7,382,241 931,632 4,987,806 13,301,679
Income tax expense   7,806,524     383,481       (232,253 )     (506,655 )     128,812       208,110       7,788,019   2,317,635     257,408       1,796,510     4,371,553
 
Net income $ 14,840,314 $ 704,544 $ (393,935 ) $ (697,753 ) $ 486,520 $ 352,984 $ 15,292,674 $ 5,064,606 $ 674,224 $ 3,191,296 $ 8,930,126
 
Earnings per common share
Basic $ 0.70   $ 0.03     $ (0.02 )   $ (0.03 )   $ 0.02     $ 0.02     $ 0.72 $ 0.25   $ 0.03     $ 0.16   $ 0.44
Diluted $ 0.68   $ 0.03     $ (0.02 )   $ (0.03 )   $ 0.02     $ 0.02     $ 0.71 $ 0.24   $ 0.03     $ 0.15   $ 0.42
 

Weighted average number of common shares outstanding

Basic   21,107,474                         21,107,474   20,519,189             20,519,189
Diluted   21,669,848                         21,669,848   21,035,559             21,035,559
These adjustments reconcile the Company’s GAAP results of operations to its non-GAAP results of operations. The Company believes that presentation of results adjusted for the non-GAAP items described below provides meaningful supplemental information to both management and investors.
 
(1) - Represents non-cash stock-based compensation expense.
(2) - Represents gain on sale of an auction rate security during the third quarter of 2011.
(3) - Represents gain on sale of an equity investment during the first quarter of 2011.
(4) - Represents expenses for the acquisition of Solidscape, Inc. during the second quarter of 2011.

(5) - Represents the revaluation of Solidscape, Inc. inventory at the time of acquisition.

(6) - Represents the fair value of a warrant issued during the first quarter of 2010 in connection with the Hewlett-Packard Company OEM agreement.
 
The Company considers these non-GAAP measures to be indicative of its core operating results and facilitates a comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes, however these measures should not be viewed as a substitute for the Company’s GAAP results.

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