Stratasys Reports Record Fourth Quarter and Fiscal Year 2013 Financial Results

Non-GAAP Discussion Disclosure

The information discussed within this release includes financial results and projections that are in accordance with accounting principles generally accepted in the United States (GAAP). In addition, certain non-GAAP financial measures have been provided excluding 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 merger-related expenses, amortization expenses and expenses associated with share-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 available on the Stratasys web site at www.stratasys.com.

Stratasys Ltd. (Nasdaq: SSYS), headquartered in Minneapolis, Minn. and Rehovot, Israel, manufactures 3D printers and materials for prototyping and production. The company’s patented FDM® and PolyJetTM 3D Printing technologies produce prototypes and manufactured goods directly from 3D CAD files or other 3D content. Systems include 3D printers for idea development, prototyping and direct digital manufacturing. Stratasys subsidiaries include MakerBot and Solidscape, and the company operates the RedEye digital-manufacturing service. Stratasys has more than 1800 employees, holds over 550 granted or pending additive manufacturing patents globally, and has received more than 20 awards for its technology and leadership. Online at: www.stratasys.com or http://blog.stratasys.com.

 
Stratasys Ltd.
 
Consolidated Statements of Operations
 
(in thousands, except per share data)
 
Three Months Ended December 31,  

Twelve Months Ended December 31,

2013   2012 2013   2012
(unaudited)   (unaudited)            
Net sales
Products $ 134,943 $ 59,461 $ 414,853 $ 179,762
Services   20,142     11,690     69,550     35,482
155,085 71,151 484,403 215,244
 
Cost of sales
Products 65,088 32,138 213,427 86,742
Services   12,195     6,175     44,803     18,591
77,283 38,313 258,230 105,333
                     
Gross profit 77,802 32,838 226,173 109,911
 
Operating expenses
Research and development, net 17,669 7,083 52,310 19,659
Selling, general and administrative 64,462 30,764 202,040 73,130
Change in fair value of earn-out obligations   (853 )   -     754     -
81,278 37,847 255,104 92,789
                     
Operating income (loss) (3,476 ) (5,009 ) (28,931 ) 17,122
 
Other income (expense) (650 ) 871 (450 ) 1,388
                     
Income (loss) before income taxes (4,126 ) (4,138 ) (29,381 ) 18,510
 
Income taxes (benefit)   (2,137 )   (239 )   (2,474 )   9,687
 
Net income (loss) $ (1,989 ) $ (3,899 ) $ (26,907 ) $ 8,823
 
Net income (loss) attributable to non-controlling interest $ -   $ 332   $ 47   $ 332
 
Net income (loss) attributable to Stratasys Ltd. $ (1,989 ) $ (4,231 ) $ (26,954 ) $ 8,491
 
Net income (loss) per ordinary share attributable to Stratasys Ltd.
Basic $ (0.04 ) $ (0.16 ) $ (0.64 ) $ 0.37
Diluted (0.07 ) (0.16 ) (0.68 ) 0.36
 
Weighted average ordinary shares outstanding
Basic 48,955 27,261 42,079 22,812
Diluted 49,036 27,261 42,099 23,776
 
 
Stratasys Ltd.
 
Consolidated Balance Sheets
 
(in thousands)
  December 31,   December 31,
2013 2012
 
ASSETS
 
Current assets
Cash and cash equivalents $ 414,088 $ 133,826
Short-term bank deposits 200,370 20,063

Accounts receivable less allowance for doubtful accounts of $1,804 at December 31, 2013 and $654 at December 31, 2012

99,200 64,678
Inventories 88,406 67,995

Net investment in sales-type leases, net for doubtful accounts of $183 at December 31, 2013 and $301 at December 31, 2012

6,696 5,134
Prepaid expenses 5,470 2,751
Deferred income taxes 16,501 4,968
Other current assets   21,398   23,863  
 
Total current assets   852,129   323,278  
 
Non-current assets
Goodwill 1,195,891 822,475
Other intangible assets, net 622,330 510,372
Net investment in sales-type leases 11,219 7,872

Amounts funded in respect of employees rights upon retirement

3,166 2,628
Property, plant and equipment, net 91,005 62,070
Other non-current assets   6,481   2,818  
 
Total non-current assets   1,930,092   1,408,235  
 
Total assets $ 2,782,221 $ 1,731,513  
 
LIABILITIES AND EQUITY
 
Current liabilities
Accounts payable $ 35,375 $ 35,235
Accrued expenses and other current liabilities 32,849 22,197
Accrued compensation and related benefits 21,441 16,849
Earn-out obligation 12,027 -
Unearned revenues   36,033   18,068  
 
Total current liabilities   137,725   92,349  
 
Non-current liabilities
Employee rights upon retirement 4,683 4,188
Earn-out obligation - long-term 16,998 -
Deferred tax liabilities 105,901 54,693
Unearned revenues - long-term 3,315 3,181
Other non-current liabilities   13,812   4,946  
 
Total liabilities   282,434   159,357  
 
Commitments and contingencies
 
Equity

Ordinary shares, NIS 0.01 nominal value, authorized 180,000 shares; 49,211 and 38,372 shares issued and outstanding at December 31, 2013 and 2012, respectively

133 101
Additional paid-in capital 2,412,197 1,459,294
Retained earnings 85,549 112,503
Accumulated other comprehensive income (loss)   1,908   (238 )
 
Equity attributable to Stratasys Ltd. 2,499,787 1,571,660
 
Non-controlling interest   -   496  
 
Total equity   2,499,787   1,572,156  
 
Total liabilities and equity $ 2,782,221 $ 1,731,513  
 
 
Stratasys Ltd.
 
Reconciliation of Pro Forma GAAP to Pro Forma Non-GAAP Results of Operations
 
(in thousands, except per share data)
 
  Three Months Ended December 31, 2013   Three Months Ended December 31, 2012
    Pro Forma     Pro Forma
Including Objet Including Objet
GAAP Non-GAAP GAAP Non-GAAP
(unaudited)   Adjustments*   (unaudited) (unaudited)   Adjustments*  

(unaudited)

Net sales
Products $ 134,943 $ 668 $ 135,611 $ 81,651 $ - $ 81,651
Services   20,142     -     20,142     14,711     -     14,711
155,085 668 155,753 96,362 - 96,362
 
Cost of sales
Products 65,088 (14,765 ) 50,323 41,641 (10,936 ) 30,705
Services   12,195     (495 )   11,700     10,329     (397 )   9,932
77,283 (15,260 ) 62,023 51,970 (11,333 ) 40,637
                                 
Gross profit 77,802 15,928 93,730 44,392 11,333 55,725
 
Operating expenses
Research and development, net 17,669 (2,207 ) 15,462 10,210 (988 ) 9,222
Selling, general and administrative 64,462 (17,633 ) 46,829 38,200 (10,059 ) 28,141
Change in fair value of earn-out obligations   (853 )   853     -     -     -     -
81,278 (18,987 ) 62,291 48,410 (11,047 ) 37,363
                                 
Operating income (loss) (3,476 ) 34,915 31,439 (4,018 ) 22,380 18,362
 
Other income (expenses) (650 ) - (650 ) 1,408 - 1,408
                                 
Income (loss) before income taxes (4,126 ) 34,915 30,789 (2,610 ) 22,380 19,770
 
Income taxes (benefit)   (2,137 )   7,133     4,996     747     2,606     3,353
 
Net income (loss) $ (1,989 ) $ 27,782 $ 25,793 $ (3,357 ) $ 19,774 $ 16,417
 
Net income attributable to non-controlling interest $ -   $ -   $ -   $ 158   $ -   $ 158
 
Net income (loss) attributable to Stratasys Ltd. $ (1,989 ) $ 27,782   $ 25,793   $ (3,515 ) $ 19,774   $ 16,259
 
Net income (loss) per ordinary share attributable to Stratasys Ltd.
Basic $ (0.04 ) $ 0.53 $ (0.09 ) $ 0.43
Diluted (0.07 ) 0.50 (0.09 ) 0.40
 
Weighted average ordinary shares outstanding
Basic 48,955 48,964 37,557 37,557
Diluted 49,036 51,429 37,557 40,327
 
 

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.

 
* Refer to the "Reconciliation of Non-GAAP Adjustments" herein for further information regarding adjustments.
 
 
Stratasys Ltd.
 
Reconciliation of Pro Forma GAAP to Pro Forma Non-GAAP Results of Operations
 
(in thousands, except per share data)
 
    Twelve Months Ended December 31, 2013   Twelve Months Ended December 31, 2012
    Pro Forma     Pro Forma
Including Objet Including Objet
GAAP Non-GAAP GAAP Non-GAAP
        Adjustments*   (unaudited) (unaudited)   Adjustments*   (unaudited)
Net sales
Products $ 414,853 $ 2,316 $ 417,169 $ 306,043 $ - $ 306,043
Services   69,550     -     69,550     53,011     -     53,011
484,403 2,316 486,719 359,054 - 359,054
 
Cost of sales
Products 213,427 (58,826 ) 154,601 158,828 (42,964 ) 115,864
Services   44,803     (1,575 )   43,228     36,303     (1,475 )   34,828
258,230 (60,401 ) 197,829 195,131 (44,439 ) 150,692
                                 
Gross profit 226,173 62,717 288,890 163,923 44,439 208,362
 
Operating expenses
Research and development, net 52,310 (5,490 ) 46,820 36,923 (3,597 ) 33,326
Selling, general and administrative 202,040 (57,652 ) 144,388 141,232 (40,354 ) 100,878
Change in fair value of earn-out obligations   754     (754 )   -     -     -     -
255,104 (63,896 ) 191,208 178,155 (43,951 ) 134,204
                                 
Operating income (loss) (28,931 ) 126,613 97,682 (14,232 ) 88,390 74,158
 
Other income (expenses) (450 ) - (450 ) 2,124 - 2,124
                                 
Income (loss) before income taxes (29,381 ) 126,613 97,232 (12,108 ) 88,390 76,282
 
Income taxes (benefit)   (2,474 )   17,575     15,101     9,407     7,225     16,632
 
Net income (loss) $ (26,907 ) $ 109,038 $ 82,131 $ (21,515 ) $ 81,165 $ 59,650
 
Net income attributable to non-controlling interest $ 47   $ 125   $ 172   $ 62   $ -   $ 62
 
Net income (loss) attributable to Stratasys Ltd. $ (26,954 ) $ 108,913   $ 81,959   $ (21,577 ) $ 81,165   $ 59,588
 
Net income (loss) per ordinary share attributable to Stratasys Ltd.
Basic $ (0.64 ) $ 1.95 $ (0.58 ) $ 1.61
Diluted (0.68 ) 1.84 (0.58 ) 1.49
 
Weighted average ordinary shares outstanding
Basic 42,079 42,079 36,987 36,987
Diluted 42,099 44,511 36,987 39,970
 
 
TheCompany 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.
 
* Refer to the "Reconciliation of Non-GAAP Adjustments" herein for further information regarding adjustments.
 
 
Stratasys Ltd.
 
Reconciliation of Non-GAAP Adjustments
 
(in thousands)
 
  Three Months Ended December 31,   Twelve Months Ended December 31,
2013   2012 2013   2012
Net sales, products
Deferred revenue step-up 668 - 2,316 -
 
Cost of sales, products
Intangible assets amortization expense (14,233 ) (10,260 ) (57,027 ) (41,038 )
Non-cash stock-based compensation expense (496 ) (361 ) (1,535 ) (1,190 )
Merger related expense   (36 )   (315 )   (264 )   (736 )
(14,765 ) (10,936 ) (58,826 ) (42,964 )
Cost of sales, services
Non-cash stock-based compensation expense (424 ) (397 ) (1,445 ) (1,475 )
Merger related expense   (71 )   -     (130 )   -  
(495 ) (397 ) (1,575 ) (1,475 )
Research and development, net
Non-cash stock-based compensation expense (925 ) (988 ) (3,491 ) (3,597 )
Performance bonus expense   (1,282 )   -     (1,999 )   -  
(2,207 ) (988 ) (5,490 ) (3,597 )
Selling, general and administrative
Intangible assets amortization expense (5,319 ) (2,375 ) (17,066 ) (9,500 )
Non-cash stock-based compensation expense (4,954 ) (5,187 ) (17,791 ) (21,592 )
Merger related expense (2,724 ) (2,497 ) (15,681 ) (9,262 )
Performance bonus expense   (4,636 )   -     (7,114 )   -  
(17,633 ) (10,059 ) (57,652 ) (40,354 )
Change in fair value of earn-out obligation
Change in Earn-out obligation 853 - (754 ) -
 
Income taxes
Tax expense related to non-GAAP adjustments 7,133 2,606 17,575 7,225
 
Net income attributable to non-controlling interest
Depreciation and amortization expense attributable to non-controlling interest   -     -     125     -  
                       
Net income $ 27,782   $ 19,774   $ 108,913   $ 81,165  
 
 
Stratasys Ltd.
 
Reconciliation of GAAP to Non-GAAP Forward Looking Guidance
 
Fiscal Year 2014
 
(in millions, except per share data)
 
GAAP net income   $10.5 to $19.9
 

Adjustments

Stock-based compensation expense $25.1 to $28.2
Intangible assets amortization expense $64.8
Merger related expense $8.8 to $9.8
 
Non-GAAP net income $113.3 to $118.6
 
GAAP diluted earnings per share $0.20 to $0.38
 
Non-GAAP diluted earnings per share $2.15 to $2.25
 

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