x |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Delaware
|
36-3658792
|
(State
or other jurisdiction of incorporation or
|
(I.R.S.
Employer Identification No.)
|
organization)
|
14950
Martin Drive, Eden Prairie, Minnesota
|
55344
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Page
|
||
Part
I.
|
Financial
Information
|
|
Item
1.
|
Financial
Statements
|
1
|
Consolidated
Balance Sheets as of September 30, 2005 (unaudited) and December
31,
2004
|
1
|
|
Consolidated
Statements of Operations and Comprehensive Income for the
|
||
three
and nine months ended September 30, 2005 and 2004
(unaudited)
|
2
|
|
Consolidated
Statements of Cash Flows for the nine months ended
|
||
September
30, 2005 and 2004 (unaudited)
|
3
|
|
Notes
to Consolidated Financial Statements
|
5
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
6
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
16
|
Item
4.
|
Controls
and Procedures
|
16
|
Part
II.
|
Other
Information
|
|
Item
6.
|
Exhibits
|
17
|
Signatures
|
18
|
September
30,
|
December
31,
|
||||||
2005
|
2004
|
||||||
(unaudited)
|
|||||||
ASSETS
|
|||||||
Current
assets
|
|||||||
Cash
and cash equivalents
|
$
|
25,463,758
|
$
|
20,624,845
|
|||
Short-term
investments
|
20,000,000
|
35,225,000
|
|||||
Accounts
receivable, less allowance for returns and
|
|||||||
doubtful
accounts of $1,584,909 in 2005 and $1,731,830 in 2004
|
18,786,293
|
14,951,350
|
|||||
Inventories
|
11,135,080
|
7,520,422
|
|||||
Net
investment in sales-type leases
|
1,689,151
|
1,324,499
|
|||||
Prepaid
expenses
|
1,585,649
|
1,756,494
|
|||||
Deferred
income taxes
|
455,000
|
455,000
|
|||||
Total
current assets
|
79,114,931
|
81,857,610
|
|||||
Property
and equipment,
net
|
11,573,677
|
10,043,657
|
|||||
Other
assets
|
|||||||
Intangible
assets, net
|
3,173,088
|
2,551,581
|
|||||
Net
investment in sales-type leases
|
2,587,771
|
2,693,830
|
|||||
Deferred
income taxes
|
354,000
|
354,000
|
|||||
Long-term
investments
|
7,606,298
|
720,000
|
|||||
Other
|
3,639,970
|
978,339
|
|||||
17,361,127
|
7,297,750
|
||||||
$
|
108,049,735
|
$
|
99,199,017
|
||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Current
liabilities
|
|||||||
Accounts
payable and other current liabilities
|
$
|
7,798,514
|
$
|
6,643,620
|
|||
Unearned
maintenance revenue
|
8,243,331
|
7,668,362
|
|||||
Total
current liabilities
|
16,041,845
|
14,311,982
|
|||||
Stockholders'
equity
|
|||||||
Common
stock, $.01 par value, authorized 15,000,000
|
|||||||
shares,
issued 12,266,496 shares in 2005 and
|
|||||||
12,211,835
shares in 2004
|
122,665
|
122,118
|
|||||
Capital
in excess of par value
|
72,376,666
|
71,762,100
|
|||||
Retained
earnings
|
27,646,344
|
20,193,048
|
|||||
Accumulated
other comprehensive income (loss)
|
(251,282
|
)
|
5,910
|
||||
Less
cost of treasury stock, 1,796,929 shares in 2005
|
|||||||
and
1,770,026 shares in 2004
|
(7,886,503
|
)
|
(7,196,141
|
)
|
|||
Total
stockholders' equity
|
92,007,890
|
84,887,035
|
|||||
$
|
108,049,735
|
$
|
99,199,017
|
Three
Months Ended September 30,
|
Nine
Months Ended September 30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
||||||||||
Net
Sales
|
|||||||||||||
Product
|
$
|
15,524,258
|
$
|
14,231,605
|
$
|
47,251,970
|
$
|
40,847,553
|
|||||
Services
|
4,157,221
|
3,489,577
|
12,077,273
|
10,035,452
|
|||||||||
19,681,479
|
17,721,182
|
59,329,243
|
50,883,005
|
||||||||||
Cost
of goods sold
|
|||||||||||||
Product
|
7,486,431
|
6,213,106
|
21,251,235
|
17,480,183
|
|||||||||
Services
|
1,362,673
|
1,063,897
|
3,682,178
|
2,772,955
|
|||||||||
8,849,104
|
7,277,003
|
24,933,413
|
20,253,138
|
||||||||||
Gross
profit
|
10,832,375
|
10,444,179
|
34,395,830
|
30,629,867
|
|||||||||
Costs
and expenses
|
|||||||||||||
Research
and development
|
1,516,253
|
1,298,006
|
4,589,981
|
3,989,402
|
|||||||||
Selling,
general and administrative
|
6,344,170
|
5,544,728
|
19,791,084
|
16,742,392
|
|||||||||
7,860,423
|
6,842,734
|
24,381,065
|
20,731,794
|
||||||||||
Operating
income
|
2,971,952
|
3,601,445
|
10,014,765
|
9,898,073
|
|||||||||
Other
income (expense)
|
|||||||||||||
Interest
income
|
416,339
|
190,888
|
1,231,921
|
427,119
|
|||||||||
Interest
expense
|
(11,510
|
)
|
(11,510
|
)
|
|||||||||
Other
|
(93,718
|
)
|
29,900
|
(405,171
|
)
|
(41,113
|
)
|
||||||
322,621
|
209,278
|
826,750
|
374,496
|
||||||||||
Income
before income taxes
|
3,294,573
|
3,810,723
|
10,841,515
|
10,272,569
|
|||||||||
Income
taxes
|
1,128,391
|
1,276,592
|
3,388,219
|
3,441,311
|
|||||||||
Net
income
|
$
|
2,166,182
|
$
|
2,534,131
|
$
|
7,453,296
|
$
|
6,831,258
|
|||||
Earnings
per common share
|
|||||||||||||
Basic
|
$
|
0.21
|
$
|
0.24
|
$
|
0.71
|
$
|
0.66
|
|||||
Diluted
|
$
|
0.20
|
$
|
0.24
|
$
|
0.69
|
$
|
0.64
|
|||||
Weighted
average number of common
|
|||||||||||||
shares
outstanding
|
|||||||||||||
Basic
|
10,467,160
|
10,374,686
|
10,496,470
|
10,326,113
|
|||||||||
Diluted
|
10,785,292
|
10,752,647
|
10,837,344
|
10,726,411
|
|||||||||
COMPREHENSIVE
INCOME
|
|||||||||||||
Net
income
|
$
|
2,166,182
|
$
|
2,534,131
|
$
|
7,453,296
|
$
|
6,831,258
|
|||||
Other
comprehensive income (loss)
|
|||||||||||||
Foreign
currency translation adjustment
|
7,318
|
22,354
|
(257,192
|
)
|
(7,852
|
)
|
|||||||
Comprehensive
income
|
$
|
2,173,500
|
$
|
2,556,485
|
$
|
7,196,104
|
$
|
6,823,406
|
Nine
Months Ended September 30,
|
|||||||
2005
|
2004
|
||||||
(unaudited)
|
(unaudited)
|
||||||
Cash
flows from operating activities
|
|||||||
Net
income
|
$
|
7,453,296
|
$
|
6,831,258
|
|||
Adjustments
to reconcile net income to net
|
|||||||
cash
provided by (used in) operating activities:
|
|||||||
Deferred
income taxes
|
416,006
|
632,959
|
|||||
Depreciation
|
1,657,518
|
1,265,027
|
|||||
Amortization
|
572,400
|
624,161
|
|||||
Loss
on disposal of assets
|
43,081
|
16,011
|
|||||
Increase
(decrease) in cash attributable to
|
|||||||
changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
(3,834,943
|
)
|
(636,091
|
)
|
|||
Inventories
|
(5,418,717
|
)
|
(3,302,740
|
)
|
|||
Net
investments in sales-type leases
|
(258,593
|
)
|
(1,996,767
|
)
|
|||
Prepaid
expenses
|
170,845
|
671,788
|
|||||
Other
assets
|
(161,631
|
)
|
215,491
|
||||
Accounts
payable and other current liabilities
|
1,154,894
|
4,376,856
|
|||||
Unearned
maintenance revenue
|
574,969
|
1,895,556
|
|||||
Net
cash provided by (used in) operating activities
|
2,369,125
|
10,593,509
|
|||||
Cash
flows from investing activities
|
|||||||
Proceeds
from (purchase of) investments
|
8,338,702
|
(98,933
|
)
|
||||
Acquisition
of property and equipment
|
(1,426,560
|
)
|
(3,203,892
|
)
|
|||
Payments
for intangible and other assets
|
(3,693,907
|
)
|
(772,998
|
)
|
|||
Net
cash provided by (used in) investing activities
|
3,218,235
|
(4,075,823
|
)
|
||||
Cash
flows from financing activities
|
|||||||
Purchase
of treasury stock
|
(690,362
|
)
|
(25,346
|
)
|
|||
Payments
of notes payable
|
(45,299
|
)
|
|||||
Net
proceeds from exercise of stock options
|
199,107
|
647,282
|
|||||
Net
cash provided by (used in) financing activities
|
(491,255
|
)
|
576,637
|
||||
Effect
of exchange rate changes on cash
|
(257,192
|
)
|
(7,852
|
)
|
|||
Net
increase in cash and cash equivalents
|
4,838,913
|
7,086,471
|
|||||
Cash
and cash equivalents,
beginning of period
|
20,624,845
|
14,319,341
|
|||||
Cash
and cash equivalents,
end of period
|
$
|
25,463,758
|
$
|
21,405,812
|
Nine
Months Ended September 30,
|
|||||||
2005
|
2004
|
||||||
(unaudited)
|
(unaudited)
|
||||||
Supplemental
disclosures of cash flow information,
|
|||||||
cash
paid during the period for:
|
|||||||
Interest
|
$
|
-
|
$
|
11,510
|
|||
Income
taxes
|
$
|
2,781,955
|
$
|
664,797
|
|||
Supplemental
disclosures of noncash investing and
|
|||||||
financing
activities:
|
|||||||
Machinery
and equipment transferred to inventory
|
$
|
121,050
|
$
|
171,982
|
|||
Inventory
transferred to machinery and equipment
|
$
|
1,925,109
|
$
|
1,295,259
|
|||
Exchange
of accounts receivable for investment in subsidiary
|
$
|
-
|
$
|
708,277
|
2005
|
2004
|
||||||
Raw
materials
|
$
|
4,584,090
|
$
|
4,057,327
|
|||
Finished
goods
|
6,550,990
|
3,463,095
|
|||||
Totals
|
$
|
11,135,080
|
$
|
7,520,422
|
Three
months ended September 30,
|
Nine
months ended September 30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Net
income as reported
|
$
|
2,166,182
|
$
|
2,534,131
|
$
|
7,453,296
|
$
|
6,831,258
|
|||||
Effect
of stock based compensation accounted
for under the fair value recognition
provisions, net of tax
|
(288,000
|
)
|
(339,250
|
)
|
(4,609,000
|
)
|
(1,017,750
|
)
|
|||||
Pro
forma net income
|
$
|
1,878,182
|
$
|
2.194.881
|
$
|
2,844,296
|
$
|
5,813,508
|
|||||
Earnings
per share:
|
|||||||||||||
Basic,
as reported
|
.21
|
.24
|
.71
|
.66
|
|||||||||
Basic,
pro forma
|
.18
|
.21
|
.27
|
.56
|
|||||||||
Diluted,
as reported
|
.20
|
.24
|
.69
|
.64
|
|||||||||
Diluted,
pro forma
|
.17
|
.20
|
.26
|
.54
|
·
|
A
growth in our backlog on manufactured high-end FDM systems from
the second
quarter;
|
·
|
The
lack of any recent high end new FDM product introduction by the
Company;
and
|
·
|
Aggressive
competitor pricing particularly in the European
market.
|
Period
Ended September 30,
|
|||||||||||||||||||
Three
Months
|
Percent
|
Nine
Months
|
Percent
|
||||||||||||||||
2005
|
2004
|
Change
|
2005
|
2004
|
Change
|
||||||||||||||
Product
|
$
|
15,524
|
$
|
14,232
|
9
|
%
|
$
|
47,252
|
$
|
40,848
|
16
|
%
|
|||||||
Services
|
4,157
|
3,490
|
19
|
%
|
12,077
|
10,035
|
20
|
%
|
|||||||||||
Net
sales
|
$
|
19,681
|
$
|
17,721
|
11
|
%
|
$
|
59,329
|
$
|
50,883
|
17
|
%
|
|||||||
Units
sold
|
306
|
246
|
24
|
%
|
934
|
821
|
14
|
%
|
Period
Ended September 30,
|
|||||||||||||||||||
Three
Months
|
Percent
|
Nine
Months
|
Percent
|
||||||||||||||||
2005
|
2004
|
Change
|
2005
|
2004
|
Change
|
||||||||||||||
Product
|
$
|
8,038
|
$
|
8,018
|
0
|
%
|
$
|
26,001
|
$
|
23,367
|
11
|
%
|
|||||||
Services
|
2,795
|
2,426
|
15
|
%
|
8,395
|
7,262
|
16
|
%
|
|||||||||||
|
$
|
10,832
|
$
|
10,444
|
4
|
%
|
$
|
34,396
|
$
|
30,630
|
12
|
%
|
|||||||
Percent
of sales
|
55.0
|
%
|
58.9
|
%
|
58.0
|
%
|
60.2
|
%
|
Period
Ended September 30,
|
|||||||||||||||||||
Three
Months
|
Percent
|
Nine
Months
|
Percent
|
||||||||||||||||
2005
|
2004
|
Change
|
2005
|
2004
|
Change
|
||||||||||||||
Research
& development
|
$
|
1,516
|
$
|
1,298
|
17
|
%
|
$
|
4,590
|
$
|
3,989
|
15
|
%
|
|||||||
Selling,
general & administrative expenses
|
6,344
|
5,545
|
14
|
%
|
19,791
|
16,742
|
18
|
%
|
|||||||||||
Total
operating expenses
|
$
|
7,860
|
$
|
6,843
|
15
|
%
|
$
|
24,381
|
$
|
20,732
|
18
|
%
|
Operating
expenses as a percent of sales:
|
Change
|
Change
|
|||||||||||||||||
Research
& development
|
7.7
|
%
|
7.3
|
%
|
.4
|
%
|
7.7
|
%
|
7.8
|
%
|
-.1
|
%
|
|||||||
Selling,
general & administrative expenses
|
32.2
|
%
|
31.3
|
%
|
.9
|
%
|
33.4
|
%
|
32.9
|
%
|
.5
|
%
|
|||||||
Total
operating expenses
|
39.9
|
%
|
38.6
|
%
|
1.3
|
%
|
41.1
|
%
|
40.7
|
%
|
.4
|
%
|
Period
Ended September 30,
|
|||||||||||||||||||
Three
Months
|
Percent
|
Nine
Months
|
Percent
|
||||||||||||||||
2005
|
2004
|
Change
|
2005
|
2004
|
Change
|
||||||||||||||
Operating
income
|
$
|
2,972
|
$
|
3,601
|
-17
|
%
|
$
|
10,015
|
$
|
9,898
|
1
|
%
|
|||||||
|
Change
|
Change
|
|||||||||||||||||
As
a percent of sales
|
15.1
|
%
|
20.3
|
%
|
-5.2
|
%
|
16.9
|
%
|
19.5
|
%
|
-2.6
|
%
|
Period
Ended September 30,
|
|||||||||||||||||||
Three
Months
|
Percent
|
Nine
Months
|
Percent
|
||||||||||||||||
2005
|
2004
|
Change
|
2005
|
2004
|
Change
|
||||||||||||||
Other
income (expense)
|
$
|
323
|
$
|
209
|
54
|
%
|
$
|
827
|
$
|
374
|
121
|
%
|
Period
Ended September 30,
|
|||||||||||||||||||
Three
Months
|
Percent
|
Nine
Months
|
Percent
|
||||||||||||||||
2005
|
2004
|
Change
|
2005
|
2004
|
Change
|
||||||||||||||
Income
taxes
|
$
|
1,128
|
$
|
1,277
|
-12
|
%
|
$
|
3,388
|
$
|
3,441
|
-2
|
%
|
|||||||
Percent
of income before taxes
|
34.25
|
%
|
33.50
|
%
|
31.25
|
%
|
33.50
|
%
|
Period
Ended September 30,
|
|||||||||||||||||||
Three
Months
|
Percent
|
Nine
Months
|
Percent
|
||||||||||||||||
2005
|
2004
|
Change
|
2005
|
2004
|
Change
|
||||||||||||||
Net
income
|
$
|
2,166
|
$
|
2,534
|
-15
|
%
|
$
|
7,453
|
$
|
6,831
|
9
|
%
|
·
|
the
continuation of our leasing program;
|
·
|
the
expansion of our paid parts
business;
|
·
|
working
capital purposes;
|
·
|
improvements
and upgrades to our existing manufacturing
facility;
|
·
|
new
product and materials development;
|
·
|
sustaining
engineering;
|
·
|
the
acquisition of a new manufacturing and office
building;
|
·
|
the
acquisition of equipment, including production equipment, tooling,
and
computers;
|
·
|
the
purchase or development of intangible assets, including
patents;
|
·
|
increased
selling and marketing activities, especially as they relate to
the
continued Dimension market and channel development as well as the
Eden
market development;
|
·
|
acquisitions
and/or strategic alliances; and
|
·
|
our
common stock buyback program.
|
·
|
continue
to introduce new RP and 3D printing systems and materials acceptable
to
the market, and to continue to improve our existing technology
and
software in our current product offerings;
|
·
|
successfully
develop the 3D printing market with our Dimension BST and Dimension
SST
products, and that the market will accept these products;
|
·
|
maintain
our revenues and gross margins on our present products;
|
·
|
control
our operating expenses;
|
·
|
expand
our manufacturing capabilities to meet the expected demand generated
by
our Dimension BST and Dimension SST systems, our paid parts business,
and
our consumable products;
|
·
|
successfully
and profitably distribute and service the Eden product line that
is
governed by our distributor agreement with Objet
Geometries;
|
·
|
the
success of our RedEye RPM service;
|
·
|
successfully
commercialize PC ABS and other new materials, and that the market
will
accept these new materials; and
|
·
|
retain
and recruit employees with the necessary skills to produce, develop,
market, and sell our products.
|
Item
6.
|
Exhibits
|
(a) |
Exhibits.
|
31.1
|
Certification
of the Chief Executive Officer required by Rule 13a-14(a) or Rule
15d-14(a).
|
31.2
|
Certification
of the Chief Financial Officer required by Rule 13a-14(a) or Rule
15d-14(a).
|
32.1
|
Certification
of the Chief Executive Officer required by Rule 13a-14(b) or Rule
15d-14(b) and 18 U.S.C. 1350.
|
32.2
|
Certification
of the Chief Financial Officer required by Rule 13a-14(b) or Rule
15d-14(b) and 18 U.S.C. 1350.
|
Date: November 8, 2005 | Stratasys, Inc. | |
|
|
|
By: | /s/ Robert F. Gallagher | |
Robert F. Gallagher |
||
Chief
Financial Officer
|