<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended March 31, 1999
OR
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the transition period from ______________ to_________________
Commission file number 1-13400
STRATASYS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 36-3658792
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
14950 Martin Drive, Eden Prairie, Minnesota 55344
(Address of Principal Executive Offices)(Zip Code)
(612) 937-3000
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the registrant: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
past 90 days. Yes X No ___
As of May 11, 1999, the Registrant had 6,101,961 shares of Common Stock,
$.01 par value, outstanding.
<PAGE> 2
STRATASYS, INC.
Index
<TABLE>
<CAPTION>
Page
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<S> <C>
Part I. Financial Information
Item 1. Financial Statements ................................................................................1
Balance Sheets as at March 31, 1999 and December 31, 1998...................................1
Statements of Operations for the three months ended March 31,
1999 and 1998...............................................................................2
Statements of Cash Flows for the three months ended
March 31, 1999 and 1998.....................................................................3
Notes to Financial Statements...............................................................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................................................5
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.....................................................................9
Signatures....................................................................................................10
</TABLE>
(i)
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STRATASYS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
MARCH 31, DECEMBER 31,
1999 1998
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 10,873,387 $ 11,243,839
Marketable Securities 593,114 4,593,910
Accounts receivable, less allowance for doubtful
accounts of $434,503 in 1999 and $409,341 in 1998 7,488,861 9,838,836
Inventories 5,052,526 5,035,588
Prepaid expenses 673,230 593,363
Deferred taxes 341,277 243,000
--------------------------------------------------------
Total current assets 25,022,395 31,548,536
--------------------------------------------------------
PROPERTY AND EQUIPMENT, net 3,638,847 3,601,829
--------------------------------------------------------
OTHER ASSETS
Intangible assets, net 2,666,408 2,788,769
Deferred income taxes 3,072,000 3,072,000
Other 172,474 179,042
--------------------------------------------------------
5,910,882 6,039,811
--------------------------------------------------------
$ 34,572,124 $ 41,190,176
========================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Obligations under capitalized leases, current portion 128,047 177,669
Purchased in-process research and development payable 6,464,709
Accounts payable and other current liabilities 3,250,887 3,601,570
Unearned maintenance revenue 3,137,565 2,649,824
--------------------------------------------------------
Total current liabilities 6,516,499 12,893,772
========================================================
Obligations Under Capitalized Leases, less current portion 193,327 193,327
--------------------------------------------------------
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value, authorized 15,000,000
shares, issued 6,100,961 shares
in 1999 and 6,100,524 shares in 1998 61,020 61,005
Capital in excess of par value 32,712,755 32,710,484
Accumulated deficit (4,040,543) (3,847,529)
Accumulated other comprehensive income (loss) 33,264 (38,956)
Less cost of treasury stock, 166,400 shares in 1999
and 137,300 shares in 1998 (904,198) (781,927)
--------------------------------------------------------
Total Stockholders' Equity 27,862,298 28,103,077
--------------------------------------------------------
$ 34,572,124 $ 41,190,176
========================================================
</TABLE>
See notes to financial statements. - 1 -
<PAGE> 4
STRATASYS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31,
1999 1998
(UNAUDITED) (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SALES $ 7,603,144 $ 7,007,672
COST OF GOODS SOLD 2,410,094 2,375,847
==============================================================
GROSS PROFIT 5,193,050 4,631,825
COSTS AND EXPENSES
Research and development 1,676,931 1,275,171
Selling, general and administrative 3,915,400 3,505,875
--------------------------------------------------------------
5,592,331 4,781,046
--------------------------------------------------------------
OPERATING LOSS (399,281) (149,221)
==============================================================
OTHER INCOME (EXPENSE)
Interest income 180,955
122,984
Interest expense (13,623)
(14,993)
--------------------------------------------------------------
107,991 167,332
--------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES
(291,290) 18,111
INCOME TAXES (BENEFIT) 6,339
(98,277)
--------------------------------------------------------------
NET INCOME (LOSS) $ (193,013) $ 11,772
--------------------------------------------------------------
EARNINGS (LOSS) PER COMMON SHARE
Basic $ (0.03) $ -
==============================================================
Diluted $ (0.03) $ -
==============================================================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic 5,959,432 6,080,146
==============================================================
Diluted 5,959,432 6,177,739
==============================================================
COMPREHENSIVE INCOME (LOSS)
NET INCOME (LOSS) $ (193,013) $ 11,772
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustment
72,220
--------------------------------------------------------------
COMPREHENSIVE INCOME (LOSS) $ (120,793) $ 11,772
==============================================================
</TABLE>
See notes to financial statements. - 2 -
<PAGE> 5
STRATASYS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31,
1999 1998
(UNAUDITED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (193,014) $ 11,772
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Deferred taxes (98,277) 6,339
Depreciation and amortization 325,978 313,124
Amortization of intangibles and other assets 217,944 234,882
Purchased in-process research and development (6,464,709)
60,000
Allowance for sales returns
60,000
Loss on disposal of asset
4,435
Increase (decrease) in cash attributable to
changes in assets and liabilities
Accounts receivable 2,349,975 3,108,527
Inventories (16,938) (769,832)
Prepaid expenses (14,364) (353,541)
Other assets
(400)
Accounts payable and other current liabilities (334,071) (14,768)
Unearned maintenance revenue 487,741 (107,179)
----------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (3,739,735) 2,553,359
----------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities, net 3,999,034 (1,253)
Acquisition of machinery and equipment (363,899) (372,811)
Payments for intangible assets (95,584) (90,226)
Proceeds from other assets, net
1,502
----------------------------------------------------
NET CASH PROVIDED BY (USED) IN INVESTING ACTIVITIES 3,541,053 (464,290)
----------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of obligations under capitalized leases (49,622) (51,340)
Net proceeds from the sale of common stock
2,286 22,891
Repurchase of treasury stock (122,271)
----------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (169,607) (28,449)
----------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
(2,163) -
----------------------------------------------------
NET INCREASE (DECREASE) IN CASH (370,452) 2,060,620
CASH AND CASH EQUIVALENTS, beginning of period 11,243,839 9,116,232
----------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 10,873,387 $ 11,176,852
====================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION,
cash paid during the period for interest $ 14,992 $ 13,623
====================================================
</TABLE>
See notes to financial statements. - 3 -
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
Note 1--Basis of Presentation
The financial information herein is unaudited; however, such information
reflects all adjustments (consisting of normal, recurring adjustments) which
are, in the opinion of management, necessary for a fair statement of results for
the interim period. The results of operations for the three months ended March
31, 1999, are not necessarily indicative of the results to be expected for the
full year. Certain financial information and footnote disclosure normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The reader is referred to
the audited financial statements and notes thereto for the year ended December
31, 1998, filed as part of the Company's Annual Report on Form 10-KSB for such
year.
Note 2--Inventory
Inventories consist of the following at March 31 and December 31,
respectively:
<TABLE>
1999 1998
---------- ----------
<S> <C> <C>
Finished Goods $2,761,265 $3,058,539
Work in process 381,723 145,108
Raw materials 1,909,538 1,831,941
---------- ----------
$5,052,526 $5,035,588
</TABLE>
Note 3--Material Commitment
The Company has signed material commitments with several vendors for fixed
delivery of selected inventory expected to be used over the remainder of 1999.
These commitments amount to approximately $1,600,000, some of which contain
non-cancellation clauses.
Note 4--Treasury stock
In the three months ended March 31, 1999, the Company purchased 29,100
shares of the Company's common stock for an aggregate purchase price of
$122,271.
- 4 -
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company develops, manufactures, and markets a family of rapid
prototyping devices that enable engineers and designers to create physical
models, tooling and prototypes out of plastic and other materials directly from
a computer aided design ("CAD") workstation. Historically, the Company's growth
has come from sales to a number of industries, including automotive, consumer
products, electronics, medical, and aerospace. Universities, other educational
institutions, and service bureaus have also been significant markets for the
Company. The Company's current and future growth is largely dependent upon its
ability to penetrate new markets, and develop and market new rapid prototyping
devices and applications that meet the needs of its current and prospective
customers. New product developments will focus on various rapid prototyping
devices, modeling materials, and software enhancements. The Company anticipates
that in 1999 its primary business strategy will focus on expanding international
and domestic sales of its existing family of rapid prototyping devices, while
maintaining on-going development of new rapid prototyping equipment, modeling
materials, and software. In addition, the Company expects to incur expenditures
throughout 1999 for the development of the technology it purchased in December
1998. The Company does not expect to commercialize this technology until the
latter part of 1999. The Company can give no assurances that it will
successfully develop this technology or that it will avoid developmental delays
that could negatively impact the commercialization of this technology.
In April 1999 the Company introduced the GenisysXs(R). This system offers
enhanced performance and speed improvements over the original Genisys(R).
Shipments of the GenisysXs(R) are expected to commence in the second quarter of
1999.
Net revenue derived from sales of the Company's rapid prototyping devices,
modeling materials, and maintenance has increased each year since 1990.
Management expects, but cannot assure, that this trend will continue. The
Company believes that it shipped more rapid prototyping systems than any of its
competitors in 1998, and that it recorded the second highest revenues within the
industry in 1998. It can give no assurances, however, that this trend will
continue. The Company's operating income declined in the first quarter of 1999
as compared with the same 1998 period, in spite of the 8.5% revenue growth. The
Company significantly expanded its expenditures on research and development
("R&D") for both new products and sustaining engineering. R&D as a percentage of
sales increased to 22.1% in the first quarter of 1999 as compared to 18.2% in
1998. These R&D expenses are expected to continue at approximately the same
level at least through the second quarter of 1999. Selling, general and
administrative ("SG&A") expenses increased to 51.5% of sales in the first
quarter of 1999 as compared with 50.5% in 1998. Some of the increase to SG&A
expenses in the first quarter of 1999 was due to upgrade programs for the
Company's Genisys(R) and Quantum products coupled with higher expenses from the
Company's German office. The Company's headcount has declined from 195
employees and contractors at the end of the first quarter of 1998 to 191
employees and contractors at the end comparable 1999 period. The future
profitability of the Company will be dependent upon the Company's ability to
control its operating expenses while increasing revenues. The Company does not
believe that meaningful improvements to its gross margins are achievable, and
gross margins could possibly decline in the event that significant price
competition emerges within the industry or if the Company's product mix were to
change dramatically. While the Company believes that profitability will improve
in 1999 as compared with 1998 as a result of higher sales coupled with operating
expense control, it can give no assurance that these results will be realized.
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<PAGE> 8
The Company believes that the rapid prototyping industry is growing at
approximately 10-15% per year. It believes that there is a trend toward lower-
priced rapid prototyping systems capable of producing functional prototypes, and
that a sizable market exists for concept or visualization 3D printers. This
pricing trend should lead to growth in the more traditional functional
prototyping marketplace as companies continue to address in-house rapid
prototyping and concept-modeling needs. Certain market segments in the industry
have not demonstrated pricing sensitivity. These segments are more interested in
modeling envelope size, modeling material variety, throughput, and part quality,
which should allow growth to continue for higher-priced rapid prototyping
systems addressing these needs.
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1999 COMPARED WITH QUARTER ENDED MARCH 31, 1998
The following table sets forth certain statement of operations data
as a percentage of net sales for the periods indicated. All items are included
in or derived from the Company's statement of income.
<TABLE>
<CAPTION>
For the quarters ended March 31,
1999 1998
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 31.7% 33.9%
Gross margin 68.3% 66.1%
Selling, general, and administrative expenses 51.5% 50.0%
Research and development expense 22.1% 18.2%
Operating income (loss) (5.3%) (2.1%)
Other income 1.4% 2.4%
Income (loss) before taxes (3.8%) 0.3%
Income taxes (benefit) (1.3%) 0.1%
Net income (loss) (2.5%) 0.2%
</TABLE>
NET SALES
Net sales for the quarter ended March 31, 1999 were $7,603,144, compared
with net sales of $7,007,672 for the quarter ended March 31, 1998. This
represents an increase of $595,472, or 8.5%. Sales of the FDM(R) Quantum, FDM(R)
2000 and Genisys(R) were strong in the quarter. The Company's FDM(R) Benchtop
systems, including refurbished and upgraded systems, and Quantum systems
continued to account for a majority of the Company's revenue in the quarter
ended March 31, 1999. Consumable and maintenance revenue also increased in the
quarter ended March 31, 1999. Maintenance and materials revenues were enhanced
by the larger installed base of systems, customer satisfaction with ABS and
other material selections, and increased emphasis on the sale of maintenance
contracts.
The average selling price of the Company's systems expanded in the current
quarter as compared with the 1998 period, primarily impacted by a favorable mix
of system sales. The Company ended the first quarter of 1999 with an order
backlog of approximately $3,500,000 compared with an order backlog of
approximately $500,000 at March 31,1998. The 1999 backlog is the highest in the
Company's history.
Domestic sales accounted for approximately 49% of total revenue in the
quarter ended March 31, 1999, which was below the 55% recorded in the comparable
period in 1998. In the United States, the central region recorded the most
revenue, while the eastern region was weak. Europe accounted for approximately
11% of total revenue in 1999,
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<PAGE> 9
down from 20% of revenue in the comparable 1998 quarter. The Company's combined
Asia-Pacific region, which comprises Japan, China, the Far East and India,
accounted for approximately 37% of total revenue, up from approximately 25%
attained in 1998. Historically, the Company has derived a larger percentage of
its revenues from its domestic regions and Europe as well as countries other
than Japan in the Asia-Pacific region. The Company believes that 1999 sales into
the Asia-Pacific countries that have been most impacted by currency and economic
turbulence will be weak. These countries include Singapore, Thailand, Indonesia,
and Malaysia. Sales in the remainder of the Asia-Pacific countries are expected
to remain strong in 1999, while sales into Europe and its domestic regions are
expected to improve over the results recorded in the first quarter of 1999. No
assurances, however, can be given that future sales and profitability will not
be adversely impacted by the economic conditions of these regions.
GROSS PROFIT
Gross profit increased to $5,592,331, or 68.3% of sales, in the
quarter ended March 31, 1999, compared with $4,631,826, or 66.1% of sales, in
the quarter ended March 31, 1998, an improvement of $561,224, or 12.1%. Gross
profit increased due to higher sales volume and favorable product mix.
OPERATING EXPENSES
SG&A expenses increased to $3,915,400 for the quarter ended March
31, 1999, from $3,505,875 for the quarter ended March 31, 1998. This represents
an increase of $409,525, or 11.7%. Approximately $200,000 of the increase in the
1999 period was for upgrade programs for the Company's Genisys(R) and Quantum
products coupled with higher international sales office expenses.
R&D expenses increased to $1,676,931 for the quarter ended March
31, 1999 from $1,275,171 for the quarter ended March 31, 1998. The increase in
1998 over 1997 amounted to $401,760, or 31.5%. Payroll related expenses,
materials, and professional services accounted for much of the increase in R&D
expenses in 1999 as compared with 1998. The Company believes that R&D expenses
will continue to be high until mid-year as the Company proceeds with its new
product development efforts, including efforts designed to commercialize the
technology that the Company purchased in December 1998.
The Company's operating loss for the quarter ended March 31, 1999
amounted to $399,281, or 5.3% of sales, compared with an operating loss of
$149,221, or 2.1% of sales, for the quarter ended March 31, 1998.
OTHER INCOME
Other income and expense netted to $107,992 in the quarter ended
March 31, 1999 compared with $167,332 in the same 1998 period. Interest income
amounted to $107,992, a decrease of $59,340 compared with 1998. This was due to
lower average balance of cash and marketable securities. Interest expense
increased by $1,369 to $14,992 in the quarter ended March 31,1999 due to the
Company's higher average balance of its capitalized leases.
NET INCOME (LOSS)
The net loss for the quarter ended March 31, 1999 amounted to
$193,013 compared with net income of $11,772 in the comparable 1998 period. This
resulted in a loss per common and common equivalent share of $.03, compared with
income per common and common equivalent share (diluted) of $.00 in the period
ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities during the quarter ended March 31, 1999 used
cash of $3,739,735, primarily reflecting the payment of $6,464,709 for the
December 1998 purchase of in-process research and development, a loss of
$193,014, and a reduction to accounts payable and other current liabilities of
$334,071. A decrease in accounts
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<PAGE> 10
receivable of $2,349,975 and an increase in unearned maintenance revenue of
$487,741 favorably impacted cash flows in the period. In the quarter ended March
31, 1998 cash provided by operating activities amounted to $2,553,359, primarily
reflecting the reduction to accounts receivable of $3,108,527, which was
partially offset by the use of cash due to increases in inventories and prepaid
expenses of $769,832 and $353,541, respectively. Cash provided by investing
activities amounted to $3,541,053 in the period ending March 31, 1999. The
proceeds from the sale of marketable securities resulted in a net increase in
cash of $3,999,034, while the Company used cash of $363,899 and $95,584 for the
acquisition of machinery and equipment and for payments for intangible assets,
respectively. The Company used cash of $464,290 in its investing activities in
the comparable 1998 period, including $372,811 for the acquisition of machinery
and equipment and $90,226 for the purchase of intangible assets. In the 1999
period, the Company's financing activities used net cash of $169,607, which
included $122,271 for the purchase of treasury stock under its stock buyback
program and $49,622 for repayments of obligations under capitalized leases. In
1998, financing activities used net cash of $28,449, including $51,340 used for
payments under capitalized leases and net proceeds from the sale of common stock
of $22,891. The net decrease in cash for the quarter ended March 31, 1999
amounted to $370,452 as compared with a net increase of $2,060,620 for the
comparable 1998 period. The Company's ending cash and cash equivalents balances
as of December 31, 1998 and 1997 were $10,873,387 and $11,176,852, respectively.
At March 31, 1999, the Company's cash, cash equivalents, and
marketable securities balances totaled $11,466,501. The remainder of these
assets will be used by the Company for working capital purposes, for improvement
to facilities, for acquisitions, for new product development and tooling, for
acquisition of production equipment and computers, for increased selling and
marketing activities, and for engineering costs required to develop and
commercialize the in-process research and development acquisition. Additionally,
the Company has received authorization from its board of directors to continue
its common stock buyback program. Management believes that the Company's revenue
from operations, its current cash and cash equivalents balance, and the proceeds
from the sale of short-term marketable securities should provide sufficient cash
resources to finance its operations for at least 24 months.
In 1998, the Company had positive cash flow from its operations.
However, the Company has historically been unable to finance its growth from
cash generated from operations. Furthermore, the Company's working capital
requirements may significantly increase if revenue growth slows, if R&D expenses
related to new product development accelerate, including development of the
in-process research and development that the Company recently acquired, or if
significant operating losses occur. No assurances can be given as to the
adequacy of the Company's working capital to support the Company's operations
following a period of losses. If the existing cash balances are insufficient or
if working capital requirements are greater than estimated, the Company could be
required to raise additional capital. There can be no assurance that the Company
will be able to raise additional capital or that the terms upon which such
capital will be available to the Company will be acceptable.
As of March 31, 1999, the Company had gross accounts receivable of
$7,923,364, less an allowance of $434,503 for returns and doubtful accounts.
Historically, the Company's bad debt expense has been minimal. However, at March
31, 1999, large balances were concentrated with certain international
distributors. While the Company can give no assurances, it believes that most,
if not all, the accounts receivable balances will ultimately be collected.
The Company's total current assets amounted to $25,022,395 at March
31, 1999, the majority of which consisted of cash, cash equivalents, marketable
securities, inventories and accounts receivable. Total current liabilities
amounted to $6,516,499. The Company's debt is minimal, consisting primarily of
principal payments due under capital leases of $321,374. The Company estimates
that it will spend approximately $1,600,000 in 1999 for facility improvements,
production and R&D equipment, computers and integrated software, and tooling. As
of March 31, 1998, material commitments for inventory purchases from selected
vendors for the ensuing twelve-month period ending December 31, 1999 amounted to
approximately $1,600,000.
- 8 -
<PAGE> 11
INFLATION
Management believes that inflation has not had a material effect on
the Company's operations or on its financial condition.
FOREIGN CURRENCY TRANSACTIONS
Substantially all of the Company's transactions are negotiated,
invoiced, and paid in US dollars. Fluctuations in the currency exchange rates in
other countries may therefore reduce the demand for the Company's products by
increasing the price of the Company's products in the currency of countries in
which the local currency has declined in value.
YEAR 2000 ISSUES
The Company believes that its products are not "date-dependant" or
"date-aware", meaning they do not rely upon calendar dates for internal
operations or overall product functionality. Furthermore, the Company's products
do not pass dates onto other computers, as dates are only used for display
purposes. The Company defines Year 2000 compliance as the ability to function
properly without interruption before, during, and after January 1, 2000. The
Company believes that all its products, including its propriety software, meet
this definition of Year 2000 compliance. The Company's internal accounting and
manufacturing software was upgraded in 1998 to a version that the vendor has
represented to be Year 2000 compliant. The Company intends to test that software
during 1999. The Company is currently working with its vendors to determine
whether they are Year 2000 compliant. The Company may be required to change
vendors that are determined not to be in compliance. The Company's customers use
a variety of CAD packages and hardware platforms. Many of these customers will
be required to upgrade these CAD packages and operating systems to new versions
that are Year 2000 compliant in order to operate their systems. Those customers
and future customers that do not elect to upgrade their systems may be unable to
generate certain required files and thus use or purchase our products. This
could have the potential to reduce future revenue, although the Company believes
that the overall impact on revenue will not be material. The cost to the Company
to determine its Year 2000 compliance has not been material and has been
included in its operating results. The Company does not believe that future
costs associated with this issue will be material to its financial condition or
its results of operations.
FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS OF
OPERATIONS
All statements herein that are not historical facts or that include
such words as expect, anticipate, project, estimate or believe or other similar
words are forward-looking statements deemed by the Company to be covered by and
to qualify for the safe harbor protection provided by the Private Securities
Litigation Reform Act of 1995 (the "1995 Act"). Investors and prospective
investors in the Company should understand that several factors govern whether
any forward-looking statement herein will be or can be achieved. Any one of
these factors could cause actual results to differ materially from those
projected herein. These forward-looking statements include the expected
increases in net sales of rapid prototyping systems and services, the ability of
the Company to maintain its gross margins on these sales, and the plans and
objectives of management to introduce new products, control expenses, improve
profitability, and develop and commercialize the purchased in-process
technology. The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. These
forward-looking statements are based on assumptions, among others, that the
Company (1) will be able to continue to introduce new rapid prototyping systems
acceptable to the market and improve existing technology and software in its
current product offering, including the Genisys(R) rapid prototyping system that
has been especially affected by technological problems, (2) will be able to
maintain its gross margins on its present products, (3) will be able to control
its operating expenses, (4) will be able to retain and recruit employees with
the necessary skills to produce, develop, market, and sell its products, and (5)
will be able to further develop and commercialize the purchased in-process
research and development that the Company acquired in December 1998. Assumptions
relating to the foregoing involve judgments with respect to, among other things,
future economic,
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<PAGE> 12
competitive, market and technology conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of those assumptions could prove inaccurate, and therefore there
is and can be no assurance that the results contemplated in any such
forward-looking statement will be realized. The impact of actual experience and
business developments may cause the Company to alter its marketing plans, its
capital expenditure budgets, or its engineering, selling or other budgets, which
may in turn affect the Company's results of operations or the success of its
engineering efforts. Due to the factors noted above and elsewhere in the
Management's Discussion and Analysis of Financial Condition and Results of
Operations, the Company's future earnings and stock price may be subject to
significant volatility, particularly on a quarterly basis. Additionally, the
Company may not learn of revenue or earnings shortfalls until late in a fiscal
quarter, since the Company frequently receives the majority of its orders very
late in a quarter. This could result in an immediate and adverse effect on the
trading price of the Company's common stock. Past financial performance should
not be considered a reliable indicator of future performance, and investors
should not use historical trends to anticipate results or trends in future
periods.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Selected Financial Data.
(b) Reports on Form 8-K.
None
- 10 -
<PAGE> 13
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.
Date: May 17, 1999 STRATASYS, INC.
By: /s/ Thomas W. Stenoien
Thomas W. Stenoien
Chief Financial Officer
(Principal Financial Officer)
- 11 -
<PAGE> 14
Exhibit Index
<TABLE>
Exhibit Description
- ------- -----------
<S> <C>
27.1 Selected Financial Data
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 10,873,387
<SECURITIES> 593,114
<RECEIVABLES> 7,923,364
<ALLOWANCES> (434,503)
<INVENTORY> 5,052,526
<CURRENT-ASSETS> 25,022,395
<PP&E> 6,929,039
<DEPRECIATION> (3,290,192)
<TOTAL-ASSETS> 34,572,124
<CURRENT-LIABILITIES> 6,518,499
<BONDS> 0
0
0
<COMMON> 61,020
<OTHER-SE> 27,801,278
<TOTAL-LIABILITY-AND-EQUITY> 34,572,124
<SALES> 7,603,144
<TOTAL-REVENUES> 7,603,144
<CGS> 2,410,094
<TOTAL-COSTS> 5,592,331
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,993
<INCOME-PRETAX> (291,290)
<INCOME-TAX> (98,277)
<INCOME-CONTINUING> (193,013)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (193,013)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
