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Proto Labs Inc - Quarter Report: 2016 March (Form 10-Q)

prlb20160331_10q.htm

 



 

UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

 

FORM 10-Q

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

 

Commission File Number: 001-35435

 

 

Proto Labs, Inc.

(Exact name of registrant as specified in its charter)

 

Minnesota

41-1939628

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

 

5540 Pioneer Creek Drive

 

Maple Plain, Minnesota

55359

(Address of principal executive offices)

(Zip Code)

 

(763) 479-3680

(Registrant’s telephone number, including area code)

 

                   Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

____________________________________________

 

     Indicate by check mark whether the registrant (1) has 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 the past 90 days.                ☑Yes ☐No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).                      ☑Yes ☐No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer    ☑

Accelerated filer  ☐

Non-accelerated filer    ☐

(Do not check if a smaller reporting company)

Smaller reporting company   ☐

     

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐Yes ☑No

 

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 26,360,113 shares of Common Stock, par value $0.001 per share, were outstanding at April 29, 2016.



 
 

 

  

Proto Labs, Inc.

TABLE OF CONTENTS

 

Item

 

Description

 

Page

         

PART I

1.

 

Financial Statements

 

3

2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

13

3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

20

4.

 

Controls and Procedures

 

21

PART II

1.

 

Legal Proceedings

 

22

1A.

 

Risk Factors

 

22

2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

22

3.

 

Defaults Upon Senior Securities

 

22

4.

 

Mine Safety Disclosures

 

22

5.

 

Other Information

 

22

6.

 

Exhibits

 

22

 

 
2

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

 

Proto Labs, Inc.

Consolidated Balance Sheets

(In thousands, except share and per share amounts)


 

   

March 31,

   

December 31,

 
   

2016

   

2015

 
   

(Unaudited)

         

Assets

               

Current assets

               

Cash and cash equivalents

  $ 50,626     $ 47,653  

Short-term marketable securities

    38,804       33,201  

Accounts receivable, net of allowance for doubtful accounts of $281 and $330 as of March 31, 2016 and December 31, 2015, respectively

    36,152       36,125  

Inventory

    9,920       9,771  

Prepaid expenses and other current assets

    6,617       5,224  

Income taxes receivable

    2,029       6,028  

Total current assets

    144,148       138,002  

Property and equipment, net

    130,341       125,475  

Goodwill

    28,916       28,916  

Other intangible assets, net

    3,150       3,337  

Long-term marketable securities

    67,726       64,789  

Other long-term assets

    554       517  

Total assets

  $ 374,835     $ 361,036  
                 

Liabilities and shareholders' equity

               

Current liabilities

               

Accounts payable

  $ 13,541     $ 13,643  

Accrued compensation

    8,747       9,993  

Accrued liabilities and other

    1,648       2,626  

Total current liabilities

    23,936       26,262  

Long-term deferred tax liabilities

    4,325       4,240  

Other long-term liabilities

    2,868       2,889  

Total liabilities

    31,129       33,391  
                 

Shareholders' equity

               

Preferred stock, $0.001 par value, authorized 10,000,000 shares; issued and outstanding 0 shares as of each of March 31, 2016 and December 31, 2015

    -       -  

Common stock, $0.001 par value, authorized 150,000,000 shares; issued and outstanding 26,301,688 and 26,200,718 shares as of March 31, 2016 and December 31, 2015, respectively

    26       26  

Additional paid-in capital

    203,490       198,835  

Retained earnings

    144,658       133,996  

Accumulated other comprehensive loss

    (4,468 )     (5,212 )

Total shareholders' equity

    343,706       327,645  

Total liabilities and shareholders' equity

  $ 374,835     $ 361,036  

 


The accompanying notes are an integral part of these consolidated financial statements.

  

 
3

 

 

Proto Labs, Inc.

Consolidated Statements of Comprehensive Income

(In thousands, except share and per share amounts)

(Unaudited)


 

   

Three Months Ended

 
   

March 31,

 
   

2016

   

2015

 
                 

Statements of Operations:

               

Revenue

  $ 72,568     $ 58,536  

Cost of revenue

    32,914       23,282  

Gross profit

    39,654       35,254  

Operating expenses

               

Marketing and sales

    10,942       8,854  

Research and development

    5,318       4,314  

General and administrative

    8,251       6,245  

Total operating expenses

    24,511       19,413  

Income from operations

    15,143       15,841  

Other income (expense), net

    625       (457 )

Income before income taxes

    15,768       15,384  

Provision for income taxes

    5,106       4,931  

Net income

  $ 10,662     $ 10,453  
                 

Net income per share:

               

Basic

  $ 0.41     $ 0.40  

Diluted

  $ 0.40     $ 0.40  
                 

Shares used to compute net income per share:

               

Basic

    26,222,148       25,850,274  

Diluted

    26,442,357       26,214,204  
                 

Comprehensive Income (net of tax)

               

Comprehensive income

  $ 11,406     $ 9,378  

 


The accompanying notes are an integral part of these consolidated financial statements.

 

 
4

 

 

Proto Labs, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


 

   

Three Months Ended

 
   

March 31,

 
   

2016

   

2015

 
                 

Operating activities

               

Net income

  $ 10,662     $ 10,453  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciation and amortization

    3,789       3,399  

Stock-based compensation expense

    1,732       1,342  

Deferred taxes

    89       343  

Excess tax benefit from stock-based compensation

    (1,310 )     (510 )

Amortization of held-to-maturity securities

    289       305  

Changes in operating assets and liabilities:

               

Accounts receivable

    23       (4,363 )

Inventories

    (62 )     (243 )

Prepaid expenses and other

    (1,557 )     (989 )

Income taxes

    5,296       2,729  

Accounts payable

    (135 )     776  

Accrued liabilities and other

    (1,872 )     2,175  

Net cash provided by operating activities

    16,944       15,417  
                 

Investing activities

               

Purchases of property and equipment

    (8,275 )     (6,230 )

Purchases of marketable securities

    (18,794 )     (11,575 )

Proceeds from sales and maturities of marketable securities

    10,465       11,646  

Net cash used in investing activities

    (16,604 )     (6,159 )
                 

Financing activities

               

Payments on debt

    -       (49 )

Acquisition-related contingent consideration

    (400 )     (1,000 )

Proceeds from exercises of stock options and other

    1,614       878  

Excess tax benefit from stock-based compensation

    1,310       510  

Net cash provided by financing activities

    2,524       339  

Effect of exchange rate changes on cash and cash equivalents

    109       (373 )

Net increase in cash and cash equivalents

    2,973       9,224  

Cash and cash equivalents, beginning of period

    47,653       43,329  

Cash and cash equivalents, end of period

  $ 50,626     $ 52,553  

 


The accompanying notes are an integral part of these consolidated financial statements.

 

 
5

 

 

Note 1 – Basis of Presentation

 

The unaudited interim Consolidated Financial Statements of Proto Labs, Inc. (Proto Labs, the Company, we, us or our) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company’s statement of financial position, results of operations and cash flows for the periods presented. Except as otherwise disclosed herein, these adjustments consist of normal, recurring items. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.

 

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. For further information, refer to the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the Securities and Exchange Commission (SEC) on February 26, 2016.

 

The accompanying Consolidated Balance Sheet as of December 31, 2015 was derived from the audited Consolidated Financial Statements but does not include all disclosures required by U.S. GAAP for a full set of financial statements. This Form 10-Q should be read in conjunction with the Company’s Consolidated Financial Statements and Notes included in the Annual Report on Form 10-K filed on February 26, 2016 as referenced above.

 

Note 2 – Recent Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue from the transfer of goods or services to customers in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. The Company is required to adopt the new pronouncement using one of two retrospective application methods.

 

On July 9, 2015, the FASB voted to approve a deferral of the effective date of ASU 2014-09 by one year to December 15, 2017 for annual reporting periods beginning after that date. The Company is evaluating the application method and the impact of this new standard on its financial statements, but does not expect the impact to be material.

 

In February 2016, the FASB issued ASU 2016-02, Leases, which introduces the balance sheet recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The guidance will be effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years with early adoption permitted. The Company is evaluating the impact of the future adoption of this standard on its consolidated financial statements.

 

In March 2016, the FASB issued ASU 2016-09, Employee Share-Based Payment Accounting, which is intended to simplify several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, and classification in the statement of cash flows. This guidance will be effective for annual reporting periods beginning after December 15, 2016 and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact this new guidance will have on its consolidated financial statements.

 

Note 3 – Net Income per Common Share

 

Basic net income per share is computed based on the weighted-average number of common shares outstanding. Diluted net income per share is computed based on the weighted-average number of common shares outstanding, increased by the number of additional shares that would have been outstanding had potentially dilutive common shares been issued and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive shares of common stock include stock options, restricted stock units and restricted stock awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan.

 

 
6

 

 

The table below sets forth the computation of basic and diluted net income per share:

 

 

       
   

Three Months Ended

 
   

March 31,

 

(in thousands, except share and per share amounts)

 

2016

   

2015

 

Net income

  $ 10,662     $ 10,453  
                 

Basic - weighted-average shares outstanding:

    26,222,148       25,850,274  

Effect of dilutive securities:

               

Employee stock options and other

    220,209       363,930  

Diluted - weighted-average shares outstanding:

    26,442,357       26,214,204  

Net income per share:

               

Basic

  $ 0.41     $ 0.40  

Diluted

  $ 0.40     $ 0.40  
                 

 

Note 4 – Goodwill and Other Intangible Assets

 

There were no changes in the carrying amount of Goodwill during the three months ended March 31, 2016.

 

Intangible assets other than Goodwill at March 31, 2016 and December 31, 2015 were as follows:

 

 

                         
   

March 31, 2016

   

December 31, 2015

   

Useful

   

Weighted Average

 

(in thousands)

 

Gross

   

Accumulated Amortization

   

Net

   

Gross

   

Accumulated Amortization

   

Net

   

Life

(in years)

   

Useful Life

 Remaining (in years)

 

Intangible Assets with finite lives:

                                                               

Marketing assets

  $ 930     $ (178 )   $ 752     $ 930     $ (155 )   $ 775       10.0       8.1  

Non-compete agreement

    190       (182 )     8       190       (158 )     32       2.0       0.1  

Trade secrets

    250       (96 )     154       250       (83 )     167       5.0       3.1  

Internally developed software

    680       (435 )     245       680       (378 )     302       3.0       1.1  

Customer relationships

    2,530       (539 )     1,991       2,530       (469 )     2,061       9.0       7.1  

Total intangible assets

  $ 4,580     $ (1,430 )   $ 3,150     $ 4,580     $ (1,243 )   $ 3,337                  
                                                                 

 

Amortization expense for intangible assets was $0.2 million for each of the three months ended March 31, 2016 and 2015.

 

Estimated aggregated amortization expense based on the current carrying value of the amortizable intangible assets is as follows:

 

 

       

(in thousands)

 

Estimated

Amortization Expense

 

Remaining 2016

  $ 495  

2017

    500  

2018

    424  

2019

    391  

2020

    374  

Thereafter

    966  

Total estimated amortization expense

  $ 3,150  
         

 

 
7

 

 

Note 5 – Fair Value Measurements

 

ASC 820, Fair Value Measurement (ASC 820), defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

 

Level 1—Quoted prices in active markets for identical assets or liabilities.

 

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

The Company’s cash consists of bank deposits. The Company’s cash equivalents measured at fair value consist of money market mutual funds. The Company determines the fair value of these investments using Level 1 inputs.

 

A summary of financial assets as of March 31, 2016 and December 31, 2015 measured at fair value on a recurring basis follows:

 

             
   

March 31, 2016

   

December 31, 2015

 

(in thousands)

 

Level 1

   

Level 2

   

Level 3

   

Level 1

   

Level 2

   

Level 3

 

Financial Assets:

                                               
Cash and cash equivalents                                                

Money market mutual fund

  $ 5,941     $ -     $ -     $ 11,896     $ -     $ -  

Total

  $ 5,941     $ -     $ -     $ 11,896     $ -     $ -  
                                                 

 

Note 6 – Marketable Securities

 

The Company invests in short-term and long-term agency, municipal, corporate and other debt securities. The securities are categorized as held-to-maturity and are recorded at amortized cost. Categorization as held-to-maturity is based on the Company’s ability and intent to hold these securities to maturity. Information regarding the Company’s short-term and long-term marketable securities as of March 31, 2016 and December 31, 2015 is as follows:

 

       
    March 31, 2016  

(in thousands)

 

Amortized

Cost

   

Unrealized

Gains

   

Unrealized

Losses

   

Fair

Value

 

U.S. municipal securities

  $ 37,517     $ 19     $ (24 )   $ 37,512  

Corporate debt securities

    30,059       21       (18 )     30,062  

U.S. government agency securities

    31,050       11       (9 )     31,052  

Certificates of deposit/time deposits

    6,405       19       -       6,424  

Commercial paper

    1,499       -       -       1,499  

Total marketable securities

  $ 106,530     $ 70     $ (51 )   $ 106,549  
                                 

 

 
8

 

 

                         
    December 31, 2015  

(in thousands)

 

Amortized

Cost

   

Unrealized

Gains

   

Unrealized

Losses

   

Fair

Value

 

U.S. municipal securities

  $ 35,667     $ 8     $ (56 )   $ 35,619  

Corporate debt securities

    28,133       -       (114 )     28,019  

U.S. government agency securities

    26,784       2       (99 )     26,687  

Certificates of deposit/time deposits

    5,909       2       (11 )     5,900  

Commercial paper

    1,497       -       (2 )     1,495  

Total marketable securities

  $ 97,990     $ 12     $ (282 )   $ 97,720  
                                 

 

 

 

Fair values for the corporate debt securities are primarily determined based on quoted market prices (Level 1). Fair values for the U.S. municipal securities, U.S. government agency securities, certificates of deposit and commercial paper are primarily determined using dealer quotes or quoted market prices for similar securities (Level 2).

 

The Company tests for other-than-temporary losses on a quarterly basis and has considered the unrealized losses indicated above, which are the result of changes in interest rates, to be temporary in nature. In reaching this conclusion, the Company considered the credit quality of the issuers of the debt securities as well as the Company’s intent to hold the investments to maturity and recover the full principal.

 

Classification of marketable securities as current or non-current is based upon the security’s maturity date as of the date of these financial statements.

 

The March 31, 2016 balance of held-to-maturity debt securities by contractual maturity is shown in the following table at amortized cost. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

 

       
   

March 31,

 

(in thousands)

 

2016

 

Due in one year or less

  $ 38,804  

Due after one year through five years

    67,726  

Total marketable securities

  $ 106,530  
         

 

Note 7 – Inventory

 

Inventory consists primarily of raw materials, which are recorded at the lower of cost or market using the average-cost method, which approximates first-in, first-out (FIFO) cost. The Company periodically reviews its inventory for slow-moving, damaged and discontinued items and provides allowances to reduce such items identified to their recoverable amounts.

 

The Company’s inventory consisted of the following as of the dates indicated:

 

 

             
   

March 31,

   

December 31,

 

(in thousands)

 

2016

   

2015

 

Raw materials

  $ 8,766     $ 8,589  

Work in process

    1,466       1,529  

Total inventory

    10,232       10,118  

Allowance for obsolescence

    (312 )     (347 )

Inventory, net of allowance

  $ 9,920     $ 9,771  
                 

 

 
9

 

 

Note 8 – Stock-Based Compensation

 

Under the 2012 Long-Term Incentive Plan (2012 Plan), the Company has the ability to grant stock options, stock appreciation rights (SARs), restricted stock, stock units, other stock-based awards and cash incentive awards. Awards under the 2012 Plan have a maximum term of ten years from the date of grant. The compensation committee may provide that the vesting or payment of any future awards will be subject to the attainment of specified performance measures in addition to the satisfaction of any continued service requirements and the compensation committee will determine whether such measures have been achieved. The per share exercise price of stock options and SARs granted under the 2012 Plan generally may not be less than the fair market value of a share of our common stock on the date of the grant.

 

Employee Stock Purchase Plan

 

The Company’s 2012 Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15 percent of their eligible compensation, subject to plan limitations. The ESPP provides for six-month offering periods ending May 15 and November 15, respectively. At the end of each offering period, employees are able to purchase shares at 85 percent of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last trading day of the offering period.

 

Stock-Based Compensation Expense

 

Stock-based compensation expense was $1.7 million and $1.3 million for the three months ended March 31, 2016 and 2015, respectively.

 

Stock Options

 

A summary of stock option activity during the three months ended March 31, 2016 is as follows:

 

               
           

Weighted-

 
           

Average

 
   

Stock Options

   

Exercise Price

 

Options outstanding at December 31, 2015

    766,042     $ 36.52  

Granted

    104,960       57.88  

Exercised

    (111,796 )     14.44  

Forfeited

    -       -  

Options outstanding at March 31, 2016

    759,206     $ 42.72  
                 

Exercisable at March 31, 2016

    350,415     $ 27.30  
                 

 

The outstanding options generally have a term of ten years. For employees, options granted become exercisable ratably over the vesting period, which is generally a five-year period beginning on the first anniversary of the grant date, subject to the employee’s continuing service to the Company. For directors, options generally become exercisable in full on the first anniversary of the grant date.

 

The weighted-average grant date fair value of options that were granted during the three months ended March 31, 2016 was $26.44.

 

 
10

 

 

The following table provides the assumptions used in the Black-Scholes pricing model valuation of options during the three months ended March 31, 2016 and 2015, respectively:

 

       
   

Three Months Ended March 31,

 
   

2016

   

2015

 

Risk-free interest rate

    1.53%       1.77%  

Expected life (years)

    6.50       6.50  

Expected volatility

    44.38%       47.23%  

Expected dividend yield

    0%       0%  
                 

 

As of March 31, 2016, there was $9.0 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 3.5 years.

 

Restricted Stock

 

Restricted stock awards are share settled awards and restrictions lapse ratably over the vesting period, which is generally a five-year period, beginning on the first anniversary of the grant date, subject to the employee's continuing service to the Company. For directors, restrictions generally lapse in full on the first anniversary of the grant date.

 

A summary of restricted stock activity during the three months ended March 31, 2016 is as follows:

 

               
           

Weighted-

 
           

Average

 
           

Grant Date

 
   

Restricted

   

Fair Value

 
   

Stock

   

Per Share

 

Restricted stock at December 31, 2015

    124,393     $ 68.97  

Granted

    47,965       57.88  

Restrictions lapsed

    (11,870 )     73.44  

Forfeited

    -       -  

Restricted stock at March 31, 2016

    160,488     $ 65.33  
                 

 

As of March 31, 2016, there was $8.7 million of unrecognized compensation expense related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of 3.9 years.

 

Employee Stock Purchase Plan

 

The following table presents the assumptions used to estimate the fair value of the ESPP during the three months ended March 31, 2016 and 2015, respectively:

 

       
   

Three Months Ended March 31,

 
   

2016

   

2015

 

Risk-free interest rate

    0.39%       0.08%  

Expected life (months)

    6.00       6.00  

Expected volatility

    29.41%       37.64%  

Expected dividend yield

    0%       0%  
                 

 

 
11

 

 

Note 9 – Accumulated Other Comprehensive Income (Loss)

 

Other comprehensive income (loss) is comprised entirely of foreign currency translation adjustments. The following table presents the changes in accumulated other comprehensive income (loss) balances during the three months ended March 31, 2016 and 2015, respectively:

 

       
    Three Months Ended  
   

March 31,

 

(in thousands)

 

2016

   

2015

 

Foreign currency translation adjustments

               

Balance at beginning of period

  $ (5,212 )   $ (2,929 )

Other comprehensive loss before reclassifications

    744       (1,075 )

Amounts reclassified from accumulated other comprehensive income (loss)

    -       -  

Net current-period other comprehensive loss

    744       (1,075 )

Balance at end of period

  $ (4,468 )   $ (4,004 )
                 

 

Note 10 Income Taxes

 

The Company is subject to income tax in multiple jurisdictions and the use of estimates is required to determine the provision for income taxes. For the three months ended March 31, 2016 and 2015, the Company recorded an income tax provision of $5.1 million and $4.9 million, respectively. The income tax provision is based on the estimated annual effective tax rate for the year applied to pre-tax income. The effective income tax rate for the three months ended March 31, 2016 was 32.4 percent compared to 32.1 percent in the same period of the prior year.

 

The effective income tax rate for the three months ended March 31, 2016 differs from the U.S. federal statutory rate of 35 percent due primarily to the mix of income earned in domestic and foreign tax jurisdictions and deductions and credits for which the Company qualifies.

 

The Company had liabilities related to unrecognized tax benefits totaling $2.9 million and $2.8 million at March 31, 2016 and December 31, 2015, respectively, all of which, if recognized, would affect the Company’s effective tax rate. The Company recognizes interest and penalties related to income tax matters in income tax expense, and reports the liability in current or long-term income taxes payable as appropriate.

 

Note 11 Revenue and Geographic Information

 

The Company’s revenue is primarily derived from its Injection Molding (Protomold), CNC Machining (Firstcut) and 3D Printing (Fineline) product lines. Total revenue by product line is as follows:

 

       
   

Three Months Ended March 31,

 

(in thousands)

 

2016

   

2015

 

Revenue:

               

Injection Molding (Protomold)

  $ 43,169     $ 37,618  

CNC Machining (Firstcut)

    18,875       16,370  

3D Printing (Fineline)

    9,110       4,548  

Other

    1,414       -  

Total revenue

  $ 72,568     $ 58,536  
                 

 

Revenue to external customers based on the billing location of the end user customer and long-lived assets by geographic region are as follows:

 

       
   

Three Months Ended March 31,

 

(in thousands)

 

2016

   

2015

 

Revenue:

               

United States

  $ 50,567     $ 44,845  

International

    22,001       13,691  

Total revenue

  $ 72,568     $ 58,536  
                 

 

             
   

March 31,

   

December 31,

 

(in thousands)

 

2016

   

2015

 

Long-lived assets:

               

United States

  $ 102,153     $ 98,633  

International

    28,188       26,842  

Total long-lived assets

  $ 130,341     $ 125,475  
                 

 

 
12

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2015.

 

Forward-Looking Statements

 

Statements contained in this report regarding matters that are not historical or current facts are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve known and unknown risks, uncertainties and other factors which may cause our results to be materially different than those expressed or implied in such statements. Certain of these risk factors and others are described in Item 1A. “Risk Factors” of our most recent Annual Report on Form 10-K as filed with the SEC. Other unknown or unpredictable factors also could have material adverse effects on our future results. We cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, we expressly disclaim any intent or obligation to update any forward-looking statements to reflect subsequent events or circumstances.

 

Overview

 

We are a leading online and technology-enabled manufacturer of quick-turn, on-demand 3D printed, CNC-machined and injection-molded custom parts for prototyping and low-volume production. We provide “Real Parts, Really Fast” to product developers and engineers worldwide, who are under increasing pressure to bring their finished products to market faster than their competition. We believe custom parts manufacturing has historically been an underserved market due to the inefficiencies inherent in the quotation, equipment set-up and non-recurring engineering processes required to produce custom parts. Our proprietary technology eliminates most of the time-consuming and expensive skilled labor conventionally required to quote and manufacture parts. Our customers conduct nearly all of their business with us over the Internet. We target our products to the millions of product developers and engineers who use three-dimensional computer-aided design (3D CAD) software to design products across a diverse range of end-markets.

 

Our primary manufacturing product lines currently include Injection Molding (Protomold), CNC Machining (Firstcut) and 3D Printing (Fineline). We continually seek to expand the range of size and geometric complexity of the parts we can make with these manufacturing processes, to extend the variety of materials we are able to support and to identify additional manufacturing processes to which we can apply our technology in order to better serve the evolving preferences and needs of product developers and engineers.

 

Injection Molding (Protomold)

 

Our Injection Molding (Protomold) product line uses our 3D CAD-to-CNC machining technology for the automated design and manufacture of thermoplastic, metal, or liquid silicone injection molds, which are then used to produce custom injection-molded parts on commercially available equipment. Our Injection Molding (Protomold) product line is used for prototype, on-demand and low-volume production. Prototype quantities typically range from 25 to 100 parts. Because we retain possession of the molds, customers who need low-volume production often come back to Proto Labs’ Injection Molding product line for additional quantities typically ranging up to 10,000 parts or more. They do so to support pilot production while their tooling for high-volume production is being prepared, because they need on-demand manufacturing due to disruptions in their manufacturing process, because their product will only be released in a limited quantity, or because they need end-of-life production support. These additional part orders typically occur on approximately half of the molds that we make, typically accounting for approximately half of our total Injection Molding (Protomold) revenue.

 

CNC Machining (Firstcut)

 

Our CNC Machining (Firstcut) product line includes both CNC-machined and CNC-turned (lathe) parts, and uses commercially available CNC machines to cut plastic or metal blocks or bars into one or more custom parts based on the 3D CAD model uploaded by the product developer or engineer. Our efficiencies derive from the automation of the programming of these machines and a proprietary fixturing process. The CNC Machining (Firstcut) product line is well suited to produce small quantities, typically in the range of one to 200 parts.

 

 
13

 

 

3D Printing (Fineline)

 

Our 3D Printing (Fineline) includes stereolithography (SL), selective laser sintering (SLS) and direct metal laser sintering (DMLS) processes, which offers customers a wide-variety of high-quality, precision rapid prototyping and low volume production. These processes create parts with a high level of accuracy, detail, strength and durability. 3D Printing is well suited to produce small quantities, typically in the range of one to 50 parts.

 

Key Financial Measures and Trends

 

Revenue

 

The Company’s operations are comprised of three geographic business units in the United States, Europe and Japan, which we believe are three of the largest geographic markets where product developers and engineers are located. Revenue within our United States and Europe business units is derived from our Injection Molding (Protomold), CNC Machining (Firstcut) and 3D Printing (Fineline) product lines. Revenue within our Japan business unit is derived from our Injection Molding (Protomold) and CNC Machining (Firstcut) product lines. Our historical and current efforts to increase revenue have been directed at gaining new customers and selling to our existing customer base by:

 

 

increasing marketing and selling activities;

 

 

introducing our CNC Machining (Firstcut) product line in 2007;

 

 

expanding internationally, including the opening of our Japanese plant in 2009;

 

 

offering additional product lines such as 3D Printing (Fineline), through our acquisition of FineLine Prototyping, Inc. (FineLine) in April 2014 and expanded through our acquisition of certain assets, including shares of select subsidiaries, of Alphaform AG (Alphaform) in 2015;

 

 

improving the usability of our product lines such as our web-centric applications; and

 

 

expanding the breadth and scope of our products, for example by adding more sizes and materials to our offerings such as liquid silicone rubber (LSR).

 

Excluding product developers and engineers gained through the acquisition of Alphaform, during the three months ended March 31, 2016, we served 13,249 unique product developers and engineers, an increase of 20% over the same period in 2015.

 

Cost of Revenue, Gross Profit and Gross Margin

 

Cost of revenue consists primarily of raw materials, employee compensation, benefits, stock-based compensation, equipment depreciation, facilities costs and overhead allocations associated with the manufacturing process for molds and custom parts. We expect cost of revenue to increase in absolute dollars, but remain relatively constant as a percentage of total revenue.

 

We define gross profit as our revenue less our cost of revenue, and we define gross margin as gross profit expressed as a percentage of revenue. Our gross profit and gross margin are affected by many factors, including our pricing, sales volume and manufacturing costs, the costs associated with increasing production capacity, the mix between sales by product line, the mix between domestic and foreign revenue sources and foreign exchange rates.

 

Operating Expenses

 

Operating expenses consist of marketing and sales, research and development and general and administrative expenses. Personnel-related costs are the most significant component of the marketing and sales, research and development and general and administrative expense categories.

 

Our recent growth in operating expenses is mainly due to higher headcounts to support our growth and expansion, and we expect that trend to continue. Our business strategy is to continue to be a leading online and technology-enabled manufacturer of quick-turn, on-demand 3D printed, CNC-machined and injection-molded custom parts for prototyping and low-volume production. For us to achieve our goals, we anticipate continued substantial investments in technology and personnel, resulting in increased operating expenses.

 

Marketing and sales. Marketing and sales expense consists primarily of employee compensation, benefits, commissions, stock-based compensation, marketing programs such as print and pay-per-click advertising, trade shows, direct mail and other related overhead. We expect sales and marketing expense to increase in the future as we increase the number of marketing and sales professionals and marketing programs targeted to increase our customer base.

 

 
14

 

 

Research and development. Research and development expense consists primarily of employee compensation, benefits, stock-based compensation, depreciation on equipment, outside services and other related overhead. All of our research and development costs have been expensed as incurred. We expect research and development expense to increase in the future as we seek to enhance and expand our product line offerings.

 

General and administrative. General and administrative expense consists primarily of employee compensation, benefits, stock-based compensation, professional service fees related to accounting, tax and legal and other related overhead. We expect general and administrative expense to increase in the future as we continue to grow and expand as a global organization.

 

Other Income (Expense), Net

 

Other income (expense), net primarily consists of foreign currency-related gains and losses and interest income on cash balances and investments. Our foreign currency-related gains and losses will vary depending upon movements in underlying exchange rates. Our interest income will vary each reporting period depending on our average cash balances during the period, composition of our marketable security portfolio and the current level of interest rates.

 

Provision for Income Taxes

 

Provision for income taxes is comprised of federal, state, local and foreign taxes based on pre-tax income. We expect income taxes to increase as our taxable income increases and we expect our effective tax rate to remain relatively constant.

 

Results of Operations

 

The following table sets forth a summary of our results of operations and the related changes for the periods indicated. The results below are not necessarily indicative of the results for future periods.

 

 

             
   

Three Months Ended March 31,

   

Change

 

(dollars in thousands)

 

2016

   

2015

   

$

   

%

 

Revenue

  $ 72,568       100.0 %   $ 58,536       100.0 %   $ 14,032       24.0 %

Cost of revenue

    32,914       45.4       23,282       39.8       9,632       41.4  

Gross profit

    39,654       54.6       35,254       60.2       4,400       12.5  

Operating expenses:

                                               

Marketing and sales

    10,942       15.1       8,854       15.1       2,088       23.6  

Research and development

    5,318       7.3       4,314       7.4       1,004       23.3  

General and administrative

    8,251       11.4       6,245       10.6       2,006       32.1  

Total operating expenses

    24,511       33.8       19,413       33.1       5,098       26.3  

Income from operations

    15,143       20.8       15,841       27.1       (698 )     (4.4 )

Other income (expense), net

    625       0.9       (457 )     (0.8 )     1,082        *  

Income before income taxes

    15,768       21.7       15,384       26.3       384       2.5  

Provision for income taxes

    5,106       7.0       4,931       8.4       175       3.5  

Net income

  $ 10,662       14.7 %   $ 10,453       17.9 %   $ 209       2.0 %
                                                 

 * Percentage change not meaningful

 

 
15

 

 

Stock-based compensation expense included in the statements of operations data above is as follows:

 

       
   

Three Months Ended March 31,

 

(dollars in thousands)

 

2016

   

2015

 

Stock options and restricted stock

  $ 1,604     $ 1,219  

Employee stock purchase plan

    127       123  

Total stock-based compensation expense

  $ 1,731     $ 1,342  
                 

Cost of revenue

  $ 130     $ 111  

Operating expenses:

               

Marketing and sales

    278       236  

Research and development

    294       294  

General and administrative

    1,029       701  

Total stock-based compensation expense

  $ 1,731     $ 1,342  
                 

 

Comparison of Three Months Ended March 31, 2016 and 2015

 

Revenue

 

Revenue by product line and the related changes for the three months ended March 31, 2016 and 2015 were as follows:

 

                       
   

Three Months Ended March 31,

                 
   

2016

   

2015

   

Change

 

(dollars in thousands)

 

$

   

% of Total Revenue

   

$

   

% of Total Revenue

   

$

   

%

 

Revenue

                                               

Injection Molding (Protomold)

  $ 43,169       59.5 %   $ 37,618       64.3 %   $ 5,551       14.8 %

CNC Machining (Firstcut)

    18,875       26.0       16,370       28.0       2,505       15.3  

3D Printing (Fineline)

    9,110       12.6       4,548       7.7       4,562       100.3  

Other

    1,414       1.9       -       -       1,414       100.0  

Total revenue

  $ 72,568       100.0 %   $ 58,536       100.0 %   $ 14,032       24.0 %
                                                 

 

 

Revenue by geographic region, based on the billing location of the end customer, for the three months ended March 31, 2016 and 2015 is summarized as follows:

 

                       
   

Three Months Ended March 31,

                 
   

2016

   

2015

   

Change

 

(dollars in thousands)

 

$

   

% of Total

Revenue

   

$

   

% of Total

Revenue

   

$

   

%

 

Revenue

                                               

United States

  $ 50,567       69.7 %   $ 44,845       76.6 %   $ 5,722       12.8 %

International

    22,001       30.3       13,691       23.4       8,310       60.7  

Total revenue

  $ 72,568       100.0 %   $ 58,536       100.0 %   $ 14,032       24.0 %
                                                 

 

Our revenue increased $14.0 million, or 24.0%, for the three months ended March 31, 2016 compared to the same period in 2015. By geographic region, this revenue growth was driven by a 12.8% increase in United States revenue and a 60.7% increase in international revenue, which includes $4.9 million in revenue from our acquisition of Alphaform in October 2015. By product line, this revenue growth was driven by a 14.8% increase in Injection Molding (Protomold) revenue, a 15.3% increase in CNC Machining (Firstcut) revenue, and a 100.3% increase in 3D Printing (Fineline) revenue, which includes a $2.5 million increase in revenue from the Alphaform acquisition, in each case for the three months ended March 31, 2016 compared to the same period in 2015.

 

 
16

 

 

Our revenue growth during the three months ended March 31, 2016 was the result of revenue gained through our acquisition of Alphaform as well as an increased number of the product developers and engineers we served. During the three months ended March 31, 2016, excluding product developers and engineers gained through the acquisition of Alphaform, we served 13,249 unique product developers and engineers, an increase of 20% over the same period in 2015. Average revenue per product developer or engineer, excluding product developers and engineers gained through the acquisition of Alphaform, decreased 4% during the three months ended March 31, 2016 when compared to the same period in 2015.

 

Our revenue increases were primarily driven by increases in sales personnel and marketing activities and revenue earned as a result of our acquisition of Alphaform in October 2015. Our sales personnel focus on gaining new customer accounts and expanding the depth and breadth into existing customer accounts. Our marketing personnel focus on marketing activities that have proven to result in the greatest number of customer prospects to support sales activity.

 

International revenue was negatively impacted by $0.4 million in foreign currency movements for the three months ended March 31, 2016 compared to the same period in 2015 due primarily to the strengthening of the United States dollar relative to the British Pound. The effect of pricing changes on revenue was negligible for the three months ended March 31, 2016 compared to the same period in 2015.

 

Cost of Revenue, Gross Profit and Gross Margin

 

Cost of Revenue. Cost of revenue increased $9.6 million, or 41.4%, for the three months ended March 31, 2016 compared to the same period in 2015, which was faster than the rate of revenue increase of 24.0% for the three months ended March 31, 2016 compared to the same period in 2015. The increase in cost of revenue resulted from the growth of the business including the Alphaform acquisition, and was due to raw material and production cost increases of $3.5 million to support increased sales volumes, an increase in direct labor headcount resulting in personnel and related cost increases of $4.8 million and equipment and facility-related cost increases of $1.3 million.

 

Gross Profit and Gross Margin. Gross profit increased from $35.3 million, or 60.2% of revenues, in the three months ended March 31, 2015 to $39.7 million, or 54.6% of revenue, in the three months ended March 31, 2016 primarily due to increases in revenue offset by the cost of revenue as discussed above. Gross margin decreased primarily as a result of lower margins in our Alphaform business as well as increases in investments of additional manufacturing capacity and the impact of fluctuations in foreign currency exchange rates.

 

Operating Expenses, Other Income (Expense), net and Provision for Income Taxes

 

Marketing and Sales. Marketing and sales expenses increased $2.1 million, or 23.6%, during the three months ended March 31, 2016 compared to the same period in 2015 due primarily to an increase in headcount resulting in personnel and related cost increases of $2.0 million and marketing program cost increases of $0.1 million. 

 

Research and Development. Our research and development expenses increased $1.0 million, or 23.3%, during the three months ended March 31, 2016 compared to the same period in 2015 due to an increase in headcount resulting in personnel and related cost increases of $0.9 million and professional services cost increases of $0.1 million.

 

General and Administrative. Our general and administrative expenses increased $2.0 million, or 32.1%, during the three months ended March 31, 2016 compared to the same period in 2015 due to an increase in headcount, including additions of Alphaform personnel, resulting in personnel and related cost increases of $1.0 million, stock-based compensation cost increases of $0.3 million, administrative cost increases of $0.5 million and professional services cost increases of $0.2 million.

 

Other Income (Expense), net. We recognized other income, net of $0.6 million for the three months ended March 31, 2016, an increase of $1.1 million when compared to other expense, net of $0.5 million for the three months ended March 31, 2015. The increase is primarily due to changes in foreign currency rates. Other income, net includes $0.4 million in foreign currency exchange gains for the three months ended March 31, 2016 compared to $0.6 million in foreign currency exchange losses in the same period of the prior year.

 

Provision for Income Taxes. Our effective tax rate of 32.4% for the three months ended March 31, 2016 increased 0.3% when compared to 32.1% for the same period in 2015. The increase in the effective tax rate is primarily due to a change in the mix of income earned in domestic and foreign jurisdictions in the quarter ended March 31, 2016 when compared to the quarter ended March 31, 2015. As a result of an increase in income before income taxes, our income tax provision increased by $0.2 million to $5.1 million for the three months ended March 31, 2016 compared to our income tax provision of $4.9 million for the three months ended March 31, 2015.

 

 
17

 

 

Liquidity and Capital Resources

 

Cash Flows

 

The following table summarizes our cash flows during the three months ended March 31, 2016 and 2015:

 

       
   

Three Months Ended March 31,

 

(dollars in thousands)

 

2016

   

2015

 

Net cash provided by operating activities

  $ 16,944     $ 15,417  

Net cash used in investing activities

    (16,604 )     (6,159 )

Net cash provided by financing activities

    2,524       339  

Effect of exchange rates on cash and cash equivalents

    109       (373 )

Net increase in cash and cash equivalents

  $ 2,973     $ 9,224  
                 

 

Sources of Liquidity

 

Historically we have primarily financed our operations and capital expenditures primarily through cash flow from operations. We had cash and cash equivalents of $50.6 million as of March 31, 2016, an increase of $3.0 million from December 31, 2015. The increase in our cash was primarily due to cash generated through operations and, to a lesser extent, proceeds from exercises of stock options and purchases through our employee stock purchase plan, which were partially offset by investing activity.

 

Cash Flows from Operating Activities

 

Cash flows from operating activities were $16.9 million during the three months ended March 31, 2016 and primarily consisted of net income of $10.7 million, adjusted for certain non-cash items, including depreciation and amortization of $3.8 million, stock-based compensation expense of $1.7 million, amortization of held-to-maturity securities of $0.3 million and deferred taxes of $0.1 million, which were partially offset by excess tax benefit from stock-based compensation expense of $1.3 million. Cash flows from operating activities increased $1.5 million during the three months ended March 31, 2016 compared to the same period in 2015 primarily due to increases in net income of $0.2 million, depreciation and amortization of $0.4 million and stock-based compensation expense of $0.4 million, changes in operating assets and liabilities of $1.6 million, which were partially offset by an increase in excess tax benefits of $0.8 million.

 

Cash flows from operating activities during the three months ended March 31, 2015 primarily consisted of net income of $10.5 million, adjusted for certain non-cash items, including depreciation and amortization of $3.4 million, stock-based compensation expense of $1.3 million, deferred taxes of $0.3 million and amortization of held-to-maturity securities of $0.3 million, which were partially offset by excess tax benefit from stock-based compensation expense of $0.5 million.

 

Cash Flows from Investing Activities

 

Cash used in investing activities was $16.6 million during the three months ended March 31, 2016, consisting of $8.3 million for the purchases of property and equipment and $18.8 million for the purchases of marketable securities, which were partially offset by $10.5 million in proceeds from maturities and call redemptions of marketable securities.

 

Cash used in investing activities during the three months ended March 31, 2015 consisted of $6.2 million for the purchases of property and equipment. Purchases of marketable securities for the period were $11.6 million, which were offset by $11.6 million in proceeds from maturities and call redemptions of marketable securities.

 

Cash Flows from Financing Activities

 

Cash provided by financing activities was $2.5 million during the three months ended March 31, 2016, consisting of proceeds from exercises of stock options of $1.6 million and $1.3 million in excess tax benefit on stock-based compensation, which were partially offset by $0.4 million for acquisition-related contingent consideration payments.

 

Cash provided by financing activities was $0.3 million for the three months ended March 31, 2015, consisting of proceeds from exercises of stock options of $0.9 million and $0.5 million in excess tax benefit on stock-based compensation, which were partially offset by $1.0 million for payments of acquisition-related contingent consideration and $0.1 million for payments of debt.

 

 
18

 

 

Off-Balance Sheet Arrangements

 

Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.

 

Critical Accounting Policies and Use of Estimates

 

We have adopted various accounting policies to prepare the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Our significant accounting policies are disclosed in Note 2 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2015. There were no material changes in our significant accounting policies during the three months ended March 31, 2016.

 

Recent Accounting Pronouncements

 

For information on recent accounting pronouncements, see Note 2 to the consolidated financial statements appearing in Part I, Item 1 in this Quarterly Report on Form 10-Q.

 

 
19

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Foreign Currency Risk

 

As a result of our foreign operations, we have revenue, expenses, assets and liabilities that are denominated in foreign currencies. We generate revenue and incur production costs and operating expenses in British Pounds, Euros and Japanese Yen.

 

Our operating results and cash flows are adversely impacted when the United States dollar appreciates relative to other foreign currencies. Additionally, our operating results and cash flows are adversely impacted when the British Pound appreciates relative to the Euro. As we expand internationally, our results of operations and cash flows will become increasingly subject to changes in foreign currency exchange rates.

 

We have not used forward contracts or currency borrowings to hedge our exposure to foreign currency risk. Foreign currency risk can be quantified by estimating the change in results of operations or financial position resulting from a hypothetical 10% adverse change in foreign exchange rates. We believe such a change would generally not have a material impact on our financial position, but could have a material impact on our results of operations. We recognized foreign currency gains of $0.4 million in the three months ended March 31, 2016. We recognized foreign currency losses of $0.6 million in the three months ended March 31, 2015.

 

 
20

 

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (Exchange Act)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures are effective and provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported accurately and within the time frames specified in the SEC’s rules and forms and accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

 

 
21

 

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, we are subject to various legal proceedings and claims that arise in the ordinary course of our business activities. Although the results of litigation and claims cannot be predicted with certainty, as of the date of these financial statements, we do not believe we are party to any litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business. 

 

Item 1A. Risk Factors

 

There have been no material changes from the risk factors we previously disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

No matters to disclose.

 

Item 3. Defaults Upon Senior Securities

 

No matters to disclose.

 

Item 4. Mine Safety Disclosures

 

No matters to disclose.

 

Item 5. Other Information

 

No matters to disclose.

 

Item 6. Exhibits

 

The following documents are filed as part of this report:

 

Exhibit Number

 

Description of Exhibit

3.1(1)

 

Third Amended and Restated Articles of Incorporation of Proto Labs, Inc.

3.2(2)

 

Amended and Restated By-Laws of Proto Labs, Inc.

3.3(3)

 

Articles of Amendment to Third Amended and Restated Articles of Incorporation of Proto Labs, Inc. dated May 20, 2015

31.1

 

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act

31.2

 

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act

32.1

 

Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Extension Schema Document

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

(1)

Previously filed as Exhibit 3.2 to the Company’s Registration Statement on Form S-1/A (File No. 333-175745), filed with the Commission on February 13, 2012, and incorporated by reference herein.

(2)

Previously filed as Exhibit 3.4 to the Company’s Registration Statement on Form S-1/A (File No. 333-175745), filed with the Commission on February 13, 2012, and incorporated by reference herein.

(3)

Previously filed as Exhibit 3.1 to the Company’s Form 8-K (File No. 001-35435), filed with the Commission on May 21, 2015, and incorporated by reference herein.

 

 
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SIGNATURE

 

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.

 

    Proto Labs, Inc.  
       

Date: May 5, 2016

 

/s/ Victoria M. Holt

 

 

 

Victoria M. Holt

 

 

 

President and Chief Executive Officer

(Principal Executive Officer)

 

 

Date: May 5, 2016

 

/s/ John A. Way

 

 

 

John A. Way

 

 

 

Chief Financial Officer

(Principal Financial Officer)