Stratasys Reports Record Fourth Quarter and Full Year Financial

Stratasys Reports Record Fourth Quarter and Full Year Financial Results

TM and other paid parts services. They also include statements about future financial and operating results of our company after the acquisition of Solidscape and anticipated benefits of the acquisition. Actual results may differ from those expressed or implied in our forward-looking statements. Such forward-looking statements involve and are subject to certain risks and uncertainties, which may cause our actual results to differ materially from those discussed in a forward-looking statement. Such risk factors include our ability to successfully integrate and market Solidscape products, our ability to attract and retain management, and our ability to protect and defend intellectual property. These statements represent beliefs and expectations only as of the date they were made. We may elect to update forward-looking statements, but we expressly disclaim any obligation to do so, even if our beliefs and expectations change. In addition to the statements described above, such forward-looking statements are subject to the risks and uncertainties described more fully in our current report on Form 8-K filed in connection with the completion of our acquisition of Solidscape and in our reports filed or to be filed with the Securities and Exchange Commission, including our annual reports on Form 10-K and quarterly reports on Form 10-Q.

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, amortization 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 December 31,						Twelve Months Ended December 31,
	2011			2010			2011			2010
	(unaudited)			(unaudited)			(unaudited)

Net sales
Products	$	36,203,136		$	27,390,340		$	127,476,277		$	97,467,028
Services		7,369,270			6,579,013			28,418,086			25,364,673
Fair value of warrant related to OEM agreement		-			-			-			(4,987,806	)
		43,572,406			33,969,353			155,894,363			117,843,895

Cost of sales
Products		17,791,760			14,002,547			61,597,044			50,358,570
Services		2,916,348			2,771,905			11,893,208			11,399,356
		20,708,108			16,774,452			73,490,252			61,757,926

Gross profit		22,864,298			17,194,901			82,404,111			56,085,969

Operating expenses
Research and development		3,672,249			2,563,575			14,359,828			9,755,168
Selling, general and administrative		10,299,981			8,477,780			39,038,316			32,863,463
		13,972,230			11,041,355			53,398,144			42,618,631

Operating income		8,892,068			6,153,546			29,005,967			13,467,338

Other income (expense)
Interest income, net		224,741			324,547			923,210			921,088
Foreign currency transaction losses, net		(458,236	)		(46,991	)		(888,076	)		(617,174	)
Other, net		46,954			21,993			2,311,263			64,086
		(186,541	)		299,549			2,346,397			368,000

Income before income taxes		8,705,527			6,453,095			31,352,364			13,835,338

Income tax expense		2,919,477			2,148,159			10,726,000			4,465,794

Net income	$	5,786,050		$	4,304,936		$	20,626,364		$	9,369,544

Earnings per common share
Basic	$	0.27		$	0.21		$	0.98		$	0.46
Diluted	$	0.27		$	0.20		$	0.95		$	0.44

Weighted average number of common shares outstanding
Basic		21,207,133			20,758,096			21,132,580			20,579,412
Diluted		21,588,350			21,390,095			21,653,185			21,129,533


Note: Certain reclassifications have been made to prior period balances to conform to current period presentation.

STRATASYS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	December 31,			December 31,
	2011			2010
	(unaudited)

ASSETS

Current assets
Cash and cash equivalents	$	20,092,200		$	27,554,411
Short-term investments - held to maturity		14,602,408			8,797,878
Accounts receivable, less allowance for doubtful accounts of $1,089,000 at December 31, 2011 and $1,095,000 at December 31, 2010		26,230,289			20,051,451
Inventories		22,771,460			17,880,714
Net investment in sales-type leases, less allowance for doubtful accounts of $230,000 at December 31, 2011 and $189,000 at December 31, 2010		3,295,039			3,096,911
Prepaid expenses and other current assets		3,259,012			3,384,394
Deferred income taxes		2,973,000			3,447,000
Total current assets		93,223,408			84,212,759

Property and equipment, net		39,669,433			29,872,945

Other assets
Goodwill		25,393,967			867,700
Other Intangible assets, net		25,295,032			5,538,014
Net investment in sales-type leases		5,494,753			3,067,446
Long-term investments - available for sale		-			1,185,250
Long-term investments - held to maturity		32,581,472			52,504,650
Other non-current assets		112,300			1,210,867
Total other assets		88,877,524			64,373,927

Total assets	$	221,770,365		$	178,459,631

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable and other current liabilities	$	19,368,197		$	12,455,628
Unearned revenues		9,768,610			11,561,521
Total current liabilities		29,136,807			24,017,149

Non-current liabilities
Deferred tax liabilities		6,760,000			207,000
Unearned revenues - long-term		2,562,195			1,953,000

Total liabilities		38,459,002			26,177,149

Commitments and contingencies

Stockholders' equity
Common stock, $.01 par value, authorized 30,000,000 shares; 26,933,301 and 26,509,518 issued at December 31, 2011 and 2010, respectively		269,333			265,095
Additional paid-in capital		118,134,006			107,781,990
Retained earnings		104,011,848			83,385,484
Accumulated other comprehensive loss		(99,399	)		(145,662	)
Treasury stock at cost, 5,687,631 shares at December 31, 2011 and 2010		(39,004,425	)		(39,004,425	)
Total stockholders' equity		183,311,363			152,282,482

Total liabilities and stockholders' equity	$	221,770,365		$	178,459,631


Note: Certain reclassifications have been made to prior period balances to conform to current period presentation.

STRATASYS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP TO GAAP RESULTS OF OPERATIONS


	Three Months Ended December 31, 2011											Three Months Ended December 31, 2010
		As Reported							Non-GAAP			As Reported							Non-GAAP
		(unaudited)			Adjustments				(unaudited)			(unaudited)			Adjustments				(unaudited)

Net sales
Products		$	36,203,136		$	-			$	36,203,136		$	27,390,340		$	-			$	27,390,340
Services			7,369,270			-				7,369,270			6,579,013			-				6,579,013
Fair value of warrant related to OEM agreement			-			-				-			-			-				-
			43,572,406			-				43,572,406			33,969,353			-				33,969,353

Cost of sales
Products			17,791,760			(436,012	)	(a)		17,355,748			14,002,547			-				14,002,547
Services			2,916,348			-				2,916,348			2,771,905			-				2,771,905
			20,708,108			(436,012	)			20,272,096			16,774,452			-				16,774,452

Gross profit			22,864,298			436,012				23,300,310			17,194,901			-				17,194,901

Operating expenses
Research and development			3,672,249			-				3,672,249			2,563,575			-				2,563,575
Selling, general and administrative			10,299,981			(632,777	)	(b)		9,667,204			8,477,780			(310,544	)	(d)		8,167,236
			13,972,230			(632,777	)			13,339,453			11,041,355			(310,544	)			10,730,811

Operating income			8,892,068			1,068,789				9,960,857			6,153,546			310,544				6,464,090

Other income (expense)
Interest income, net			224,741			-				224,741			324,547			-				324,547
Foreign currency transaction losses, net			(458,236	)		-				(458,236	)		(46,991	)		-				(46,991	)
Other, net			46,954			-				46,954			21,993			-				21,993
			(186,541	)		-				(186,541	)		299,549			-				299,549

Income before income taxes			8,705,527			1,068,789				9,774,316			6,453,095			310,544				6,763,639

Income tax expense			2,919,477			243,134		(c)		3,162,611			2,148,159			166,847		(c)		2,315,006

Net income		$	5,786,050		$	825,655			$	6,611,705		$	4,304,936		$	143,697			$	4,448,633

Earnings per common share
Basic		$	0.27		$	0.04			$	0.31		$	0.21		$	0.01			$	0.21
Diluted		$	0.27		$	0.04			$	0.31		$	0.20		$	0.01			$	0.21

Weighted average number of common shares outstanding
Basic			21,207,133							21,207,133			20,758,096							20,758,096
Diluted			21,588,350							21,588,350			21,390,095							21,390,095

STRATASYS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP TO GAAP RESULTS OF OPERATIONS


	Twelve Months Ended December 31, 2011										Twelve Months Ended December 31, 2010
	As Reported							Non-GAAP										Non-GAAP
	(unaudited)			Adjustments				(unaudited)			As Reported			Adjustments				(unaudited)

Net sales
Products	$	127,476,277		$	-			$	127,476,277		$	97,467,028		$	-			$	97,467,028
Services		28,418,086			-				28,418,086			25,364,673			-				25,364,673
Fair value of warrant related to OEM agreement		-			-				-			(4,987,806	)		4,987,806		(h)		-
		155,894,363			-				155,894,363			117,843,895			4,987,806				122,831,701

Cost of sales
Products		61,597,044			(1,723,792	)	(e)		59,873,252			50,358,570			-				50,358,570
Services		11,893,208			-				11,893,208			11,399,356			-				11,399,356
		73,490,252			(1,723,792	)			71,766,460			61,757,926			-				61,757,926

Gross profit		82,404,111			1,723,792				84,127,903			56,085,969			4,987,806				61,073,775

Operating expenses
Research and development		14,359,828			-				14,359,828			9,755,168			-				9,755,168
Selling, general and administrative		39,038,316			(2,558,356	)	(f)		36,479,960			32,863,463			(1,242,176	)	(d)		31,621,287
		53,398,144			(2,558,356	)			50,839,788			42,618,631			(1,242,176	)			41,376,455

Operating income		29,005,967			4,282,149				33,288,116			13,467,338			6,229,982				19,697,320

Other income (expense)
Interest income, net		923,210			-				923,210			921,088			-				921,088
Foreign currency transaction losses, net		(888,076	)		-				(888,076	)		(617,174	)		-				(617,174	)
Other, net		2,311,263			(1,830,596	)	(g)		480,667			64,086			-				64,086
		2,346,397			(1,830,596	)			515,801			368,000			-				368,000

Income before income taxes		31,352,364			2,451,553				33,803,917			13,835,338			6,229,982				20,065,320

Income tax expense		10,726,000			601,345		(c)		11,327,345			4,465,794			2,220,765		(c)		6,686,559

Net income	$	20,626,364		$	1,850,208			$	22,476,572		$	9,369,544		$	4,009,217			$	13,378,761

Earnings per common share
Basic	$	0.98		$	0.09			$	1.06		$	0.46		$	0.19			$	0.65
Diluted	$	0.95		$	0.09			$	1.04		$	0.44		$	0.19			$	0.63

Weighted average number of common shares outstanding
Basic		21,132,580							21,132,580			20,579,412							20,579,412
Diluted		21,653,185							21,653,185			21,129,533							21,129,533

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.

(a) Represents amortization expense related to acquired Solidscape, Inc. intangible assets.
(b) Represents non-cash stock-based compensation expense of $499,444 and amortization expense of $133,333 related to acquired Solidscape, Inc. intangible assets.
(c) Represents the tax benefit related to non-GAAP adjustments.
(d) Represents non-cash stock-based compensation expense.
(e) Represents amortization expense of $1,162,698 related to acquired Solidscape, Inc. intangible assets and $561,094 for the revaluation of Solidscape, Inc. inventory at the time of acquistion.
(f) Represents non-cash stock-based compensation expense of $1,587,468, amortization expense of $355,556 related to acquired Solidscape, Inc. intangible assets and expense of $615,332 for the acquisition of Solidscape, Inc. during the second quarter of 2011.
(g) Represents a gain of $1,204,408 on the sale of an equity investment during the first quarter of 2011 and a gain of $626,188 on the sale of an auction rate security during the third quarter of 2011.
(h) 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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