0001437749-19-020806.txt : 20191029 0001437749-19-020806.hdr.sgml : 20191029 20191029114715 ACCESSION NUMBER: 0001437749-19-020806 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 70 CONFORMED PERIOD OF REPORT: 20190930 FILED AS OF DATE: 20191029 DATE AS OF CHANGE: 20191029 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Proto Labs Inc CENTRAL INDEX KEY: 0001443669 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED STRUCTURAL METAL PRODUCTS [3440] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-35435 FILM NUMBER: 191175335 BUSINESS ADDRESS: STREET 1: 5540 Pioneer Creek CITY: Maple Plain STATE: MN ZIP: 55359 BUSINESS PHONE: 763-479-7474 MAIL ADDRESS: STREET 1: 5540 Pioneer Creek CITY: Maple Plain STATE: MN ZIP: 55359 10-Q 1 prlb20190930_10q.htm FORM 10-Q prlb20190630_10q.htm
0001443669Proto Labs Incfalse--12-31Q32019013.11106454531,0019190.0010.00110,000,00010,000,00000000.0010.001150,000,000150,000,00026,759,109 26,984,747 26,759,109 26,984,747 00014436692019-01-012019-09-30xbrli:shares00014436692019-10-24thunderdome:itemiso4217:USD00014436692019-09-3000014436692018-12-3100014436692019-07-012019-09-3000014436692018-07-012018-09-3000014436692018-01-012018-09-30iso4217:USDxbrli:shares0001443669us-gaap:CommonStockMember2018-12-310001443669us-gaap:AdditionalPaidInCapitalMember2018-12-310001443669us-gaap:RetainedEarningsMember2018-12-310001443669us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310001443669us-gaap:CommonStockMember2019-01-012019-03-310001443669us-gaap:AdditionalPaidInCapitalMember2019-01-012019-03-3100014436692019-01-012019-03-310001443669us-gaap:RetainedEarningsMember2019-01-012019-03-310001443669us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-03-310001443669us-gaap:CommonStockMember2019-03-310001443669us-gaap:AdditionalPaidInCapitalMember2019-03-310001443669us-gaap:RetainedEarningsMember2019-03-310001443669us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-3100014436692019-03-310001443669us-gaap:CommonStockMember2019-04-012019-06-300001443669us-gaap:AdditionalPaidInCapitalMember2019-04-012019-06-3000014436692019-04-012019-06-300001443669us-gaap:NoncompeteAgreementsMembersrt:MaximumMember2019-01-012019-09-300001443669us-gaap:CustomerRelationshipsMembersrt:MaximumMember2019-01-012019-09-300001443669us-gaap:RetainedEarningsMember2019-04-012019-06-300001443669us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-04-012019-06-300001443669us-gaap:CommonStockMember2019-06-300001443669us-gaap:AdditionalPaidInCapitalMember2019-06-300001443669us-gaap:RetainedEarningsMember2019-06-300001443669us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-3000014436692019-06-300001443669us-gaap:CommonStockMember2019-07-012019-09-300001443669us-gaap:AdditionalPaidInCapitalMember2019-07-012019-09-300001443669us-gaap:RetainedEarningsMember2019-07-012019-09-300001443669us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-07-012019-09-300001443669us-gaap:CommonStockMember2019-09-300001443669us-gaap:AdditionalPaidInCapitalMember2019-09-300001443669us-gaap:RetainedEarningsMember2019-09-300001443669us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-09-300001443669us-gaap:CommonStockMember2017-12-310001443669us-gaap:AdditionalPaidInCapitalMember2017-12-310001443669us-gaap:RetainedEarningsMember2017-12-310001443669us-gaap:AccumulatedOtherComprehensiveIncomeMember2017-12-3100014436692017-12-310001443669us-gaap:CommonStockMember2018-01-012018-03-310001443669us-gaap:AdditionalPaidInCapitalMember2018-01-012018-03-3100014436692018-01-012018-03-310001443669us-gaap:RetainedEarningsMember2018-03-3100014436692018-03-310001443669us-gaap:RetainedEarningsMember2018-01-012018-03-310001443669us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-01-012018-03-310001443669us-gaap:CommonStockMember2018-03-310001443669us-gaap:AdditionalPaidInCapitalMember2018-03-310001443669us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-03-310001443669us-gaap:CommonStockMember2018-04-012018-06-300001443669us-gaap:AdditionalPaidInCapitalMember2018-04-012018-06-3000014436692018-04-012018-06-300001443669us-gaap:RetainedEarningsMember2018-04-012018-06-300001443669us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-04-012018-06-300001443669us-gaap:CommonStockMember2018-06-300001443669us-gaap:AdditionalPaidInCapitalMember2018-06-300001443669us-gaap:RetainedEarningsMember2018-06-300001443669us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-06-3000014436692018-06-300001443669us-gaap:CommonStockMember2018-07-012018-09-300001443669us-gaap:AdditionalPaidInCapitalMember2018-07-012018-09-300001443669us-gaap:RetainedEarningsMember2018-07-012018-09-300001443669us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-07-012018-09-300001443669us-gaap:CommonStockMember2018-09-300001443669us-gaap:AdditionalPaidInCapitalMember2018-09-300001443669us-gaap:RetainedEarningsMember2018-09-300001443669us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-09-3000014436692018-09-300001443669us-gaap:AccountingStandardsUpdate201602Member2019-01-010001443669us-gaap:MarketingRelatedIntangibleAssetsMember2019-09-300001443669us-gaap:MarketingRelatedIntangibleAssetsMember2018-12-31utr:Y0001443669us-gaap:MarketingRelatedIntangibleAssetsMember2019-01-012019-09-300001443669us-gaap:NoncompeteAgreementsMember2019-09-300001443669us-gaap:NoncompeteAgreementsMember2018-12-310001443669us-gaap:NoncompeteAgreementsMembersrt:MinimumMember2019-01-012019-09-300001443669us-gaap:NoncompeteAgreementsMember2019-01-012019-09-300001443669us-gaap:TradeSecretsMember2019-09-300001443669us-gaap:TradeSecretsMember2018-12-310001443669us-gaap:TradeSecretsMember2019-01-012019-09-300001443669us-gaap:TradeNamesMember2019-09-300001443669us-gaap:TradeNamesMember2018-12-310001443669us-gaap:TradeNamesMember2019-01-012019-09-300001443669us-gaap:ComputerSoftwareIntangibleAssetMember2019-09-300001443669us-gaap:ComputerSoftwareIntangibleAssetMember2018-12-310001443669us-gaap:ComputerSoftwareIntangibleAssetMember2019-01-012019-09-300001443669us-gaap:CustomerRelationshipsMember2019-09-300001443669us-gaap:CustomerRelationshipsMember2018-12-310001443669us-gaap:CustomerRelationshipsMembersrt:MinimumMember2019-01-012019-09-300001443669us-gaap:CustomerRelationshipsMember2019-01-012019-09-300001443669us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-09-300001443669us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2019-09-300001443669us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-09-300001443669us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2018-12-310001443669us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2018-12-310001443669us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2018-12-310001443669us-gaap:USStatesAndPoliticalSubdivisionsMember2019-09-300001443669us-gaap:CorporateDebtSecuritiesMember2019-09-300001443669us-gaap:USGovernmentAgenciesDebtSecuritiesMember2019-09-300001443669us-gaap:BankTimeDepositsMember2019-09-300001443669us-gaap:CommercialPaperNotIncludedWithCashAndCashEquivalentsMember2019-09-300001443669us-gaap:USStatesAndPoliticalSubdivisionsMember2018-12-310001443669us-gaap:CorporateDebtSecuritiesMember2018-12-310001443669us-gaap:USGovernmentAgenciesDebtSecuritiesMember2018-12-310001443669us-gaap:BankTimeDepositsMember2018-12-310001443669prlb:OfficeSpaceManufacturingFacilitiesAndCertainCompanyVehiclesAndEquipmentMembersrt:MinimumMember2019-09-300001443669prlb:OfficeSpaceManufacturingFacilitiesAndCertainCompanyVehiclesAndEquipmentMembersrt:MaximumMember2019-09-30xbrli:pure0001443669us-gaap:EmployeeStockOptionMember2019-01-012019-09-300001443669prlb:ESPPMember2019-01-012019-09-30utr:M0001443669us-gaap:EmployeeStockOptionMembersrt:MinimumMember2019-01-012019-09-300001443669us-gaap:EmployeeStockOptionMembersrt:MaximumMember2019-01-012019-09-300001443669us-gaap:EmployeeStockOptionMembersrt:MaximumMember2018-01-012018-09-300001443669us-gaap:EmployeeStockOptionMembersrt:MinimumMember2018-01-012018-09-300001443669us-gaap:EmployeeStockOptionMember2018-01-012018-09-300001443669us-gaap:EmployeeStockOptionMember2019-09-300001443669us-gaap:RestrictedStockMembersrt:MinimumMember2019-01-012019-09-300001443669us-gaap:RestrictedStockMembersrt:MaximumMember2019-01-012019-09-300001443669us-gaap:RestrictedStockMember2018-12-310001443669us-gaap:RestrictedStockMember2019-01-012019-09-300001443669us-gaap:RestrictedStockMember2019-09-300001443669us-gaap:PerformanceSharesMember2019-09-300001443669us-gaap:PerformanceSharesMember2019-01-012019-09-300001443669us-gaap:PerformanceSharesMember2018-12-310001443669prlb:ESPPMembersrt:MaximumMember2019-01-012019-09-300001443669prlb:ESPPMembersrt:MinimumMember2019-01-012019-09-300001443669prlb:ESPPMembersrt:MaximumMember2018-01-012018-09-300001443669prlb:ESPPMembersrt:MinimumMember2018-01-012018-09-300001443669prlb:ESPPMember2018-01-012018-09-300001443669us-gaap:AccumulatedTranslationAdjustmentMember2019-06-300001443669us-gaap:AccumulatedTranslationAdjustmentMember2018-06-300001443669us-gaap:AccumulatedTranslationAdjustmentMember2018-12-310001443669us-gaap:AccumulatedTranslationAdjustmentMember2017-12-310001443669us-gaap:AccumulatedTranslationAdjustmentMember2019-07-012019-09-300001443669us-gaap:AccumulatedTranslationAdjustmentMember2018-07-012018-09-300001443669us-gaap:AccumulatedTranslationAdjustmentMember2019-01-012019-09-300001443669us-gaap:AccumulatedTranslationAdjustmentMember2018-01-012018-09-300001443669us-gaap:AccumulatedTranslationAdjustmentMember2019-09-300001443669us-gaap:AccumulatedTranslationAdjustmentMember2018-09-300001443669us-gaap:OperatingSegmentsMemberprlb:UnitedStatesSegmentMember2019-07-012019-09-300001443669us-gaap:OperatingSegmentsMemberprlb:UnitedStatesSegmentMember2018-07-012018-09-300001443669us-gaap:OperatingSegmentsMemberprlb:UnitedStatesSegmentMember2019-01-012019-09-300001443669us-gaap:OperatingSegmentsMemberprlb:UnitedStatesSegmentMember2018-01-012018-09-300001443669us-gaap:OperatingSegmentsMemberprlb:EuropeSegmentMember2019-07-012019-09-300001443669us-gaap:OperatingSegmentsMemberprlb:EuropeSegmentMember2018-07-012018-09-300001443669us-gaap:OperatingSegmentsMemberprlb:EuropeSegmentMember2019-01-012019-09-300001443669us-gaap:OperatingSegmentsMemberprlb:EuropeSegmentMember2018-01-012018-09-300001443669us-gaap:OperatingSegmentsMemberprlb:JapanSegmentMember2019-07-012019-09-300001443669us-gaap:OperatingSegmentsMemberprlb:JapanSegmentMember2018-07-012018-09-300001443669us-gaap:OperatingSegmentsMemberprlb:JapanSegmentMember2019-01-012019-09-300001443669us-gaap:OperatingSegmentsMemberprlb:JapanSegmentMember2018-01-012018-09-300001443669us-gaap:OperatingSegmentsMember2019-07-012019-09-300001443669us-gaap:OperatingSegmentsMember2018-07-012018-09-300001443669us-gaap:OperatingSegmentsMember2019-01-012019-09-300001443669us-gaap:OperatingSegmentsMember2018-01-012018-09-300001443669us-gaap:OperatingSegmentsMemberprlb:CorporateUnallocatedAndJapanSegmentMember2019-07-012019-09-300001443669us-gaap:OperatingSegmentsMemberprlb:CorporateUnallocatedAndJapanSegmentMember2018-07-012018-09-300001443669us-gaap:OperatingSegmentsMemberprlb:CorporateUnallocatedAndJapanSegmentMember2019-01-012019-09-300001443669us-gaap:OperatingSegmentsMemberprlb:CorporateUnallocatedAndJapanSegmentMember2018-01-012018-09-300001443669prlb:CorporateAndReconcilingItemsMember2019-07-012019-09-300001443669prlb:CorporateAndReconcilingItemsMember2018-07-012018-09-300001443669prlb:CorporateAndReconcilingItemsMember2019-01-012019-09-300001443669prlb:CorporateAndReconcilingItemsMember2018-01-012018-09-300001443669us-gaap:OperatingSegmentsMemberprlb:UnitedStatesSegmentMember2019-09-300001443669us-gaap:OperatingSegmentsMemberprlb:UnitedStatesSegmentMember2018-12-310001443669us-gaap:OperatingSegmentsMemberprlb:EuropeSegmentMember2019-09-300001443669us-gaap:OperatingSegmentsMemberprlb:EuropeSegmentMember2018-12-310001443669us-gaap:OperatingSegmentsMemberprlb:JapanSegmentMember2019-09-300001443669us-gaap:OperatingSegmentsMemberprlb:JapanSegmentMember2018-12-31
 

 

Table of Contents

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 September 30, 2019

 

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 incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

5540 Pioneer Creek Drive

 

Maple Plain, Minnesota

55359

(Address of principal executive offices)

(Zip Code)

 

(763479-3680

(Registrant’s telephone number, including area code)

 

Not Applicable

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

  

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, Par Value $0.001 Per Share

PRLB

New York Stock Exchange

 

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 every Interactive Data File required to be submitted 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 such files).  ☑Yes ☐No

 

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

 

Large accelerated filer

Accelerated filer     

Non-accelerated filer

☐    

 

Smaller reporting company

Emerging growth company

    

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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: 26,759,436 shares of Common Stock, par value $0.001 per share, were outstanding at October 24, 2019.

 

 

 

Proto Labs, Inc.

TABLE OF CONTENTS

 

Item

 

Description

 

Page

 

 

 

 

 

PART I

1.

 

Financial Statements

 

1

2.

 

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

 

17

3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

28

4.

 

Controls and Procedures

 

29

PART II

1.

 

Legal Proceedings

 

30

1A.

 

Risk Factors

 

30

2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

30

3.

 

Defaults Upon Senior Securities

 

30

4.

 

Mine Safety Disclosures

 

30

5.

 

Other Information

 

30

6.

 

Exhibits

 

31

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

 

Proto Labs, Inc.

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 


 

   

September 30,

   

December 31,

 
   

2019

   

2018

 
   

(Unaudited)

         

Assets

               

Current assets

               
Cash and cash equivalents   $ 121,568     $ 85,046  
Short-term marketable securities     23,642       46,750  
Accounts receivable, net of allowance for doubtful accounts of $1,001 and $919 as of September 30, 2019 and December 31, 2018, respectively     64,069       59,155  
Inventory     9,448       10,087  
Prepaid expenses and other current assets     8,038       8,567  
Income taxes receivable     2,852       5,757  

Total current assets

    229,617       215,362  
Property and equipment, net     252,579       228,001  
Goodwill     128,752       128,752  
Other intangible assets, net     18,258       19,850  
Long-term marketable securities     9,783       23,579  
Operating lease assets     12,008       -  
Other long-term assets     3,902       3,441  

Total assets

  $ 654,899     $ 618,985  
                 

Liabilities and shareholders' equity

               

Current liabilities

               
Accounts payable   $ 18,668     $ 17,411  
Accrued compensation     12,926       18,130  
Accrued liabilities and other     13,133       16,702  
Current operating lease liabilities     3,364       -  
Income taxes payable     6,717       491  

Total current liabilities

    54,808       52,734  
Long-term operating lease liabilities     9,006       -  
Long-term deferred tax liabilities     21,750       20,162  
Other long-term liabilities     5,238       4,592  

Total liabilities

    90,802       77,488  
                 

Shareholders' equity

               

Preferred stock, $0.001 par value, authorized 10,000,000 shares; issued and outstanding 0 shares as of each of September 30, 2019 and December 31, 2018

    -       -  
Common stock, $0.001 par value, authorized 150,000,000 shares; issued and outstanding 26,759,109 and 26,984,747 shares as of September 30, 2019 and December 31, 2018, respectively     27       27  
Additional paid-in capital     265,178       258,502  
Retained earnings     309,536       291,460  
Accumulated other comprehensive loss     (10,644 )     (8,492 )

Total shareholders' equity

    564,097       541,497  

Total liabilities and shareholders' equity

  $ 654,899     $ 618,985  

 


 

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

 

 

 

Proto Labs, Inc.

Consolidated Statements of Comprehensive Income

(In thousands, except share and per share amounts)

(Unaudited)

 


 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30,

   

September 30,

 
   

2019

   

2018

   

2019

   

2018

 
                                 

Statements of Operations:

                               
Revenue   $ 117,455     $ 115,430     $ 346,839     $ 332,827  
Cost of revenue     57,839       53,027       168,127       153,303  

Gross profit

    59,616       62,403       178,712       179,524  

Operating expenses

                               
Marketing and sales     17,604       16,818       55,466       50,947  
Research and development     8,359       7,458       24,541       21,155  
General and administrative     12,380       13,096       38,411       38,679  

Total operating expenses

    38,343       37,372       118,418       110,781  

Income from operations

    21,273       25,031       60,294       68,743  
Other income, net     228       390       1,566       1,376  

Income before income taxes

    21,501       25,421       61,860       70,119  
Provision for income taxes     4,709       4,484       13,391       12,817  

Net income

  $ 16,792     $ 20,937     $ 48,469     $ 57,302  
                                 

Net income per share:

                               
Basic   $ 0.63     $ 0.77     $ 1.80     $ 2.13  
Diluted   $ 0.62     $ 0.77     $ 1.79     $ 2.10  
                                 

Shares used to compute net income per share:

                               
Basic     26,846,030       27,038,585       26,894,420       26,963,205  
Diluted     27,005,341       27,337,886       27,072,873       27,268,311  
                                 

Comprehensive Income (net of tax)

                               
Comprehensive income   $ 14,642     $ 20,058     $ 46,317     $ 55,298  

 


 

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

 

 

 

Proto Labs, Inc.

Consolidated Statements of Shareholders' Equity

(In thousands, except share amounts)

 


 

   

Common Stock

   

Additional

           

Accumulated Other

         
                   

Paid-In

   

Retained

   

Comprehensive

         
   

Shares

   

Amount

   

Capital

   

Earnings

   

Loss

   

Total

 
                                                 

Balance at January 1, 2019

    26,984,747       27       258,502       291,460       (8,492 )     541,497  

Common shares issued on exercise of options and other, net of shares withheld for tax obligations

    19,950       -       (420 )     -       -       (420 )

Stock-based compensation expense

    -       -       3,040       -       -       3,040  

Repurchases of common stock

    (157,716 )     -       (1,511 )     (15,798 )     -       (17,309 )

Net income

    -       -       -       15,511       -       15,511  

Other comprehensive income

                                               

Foreign currency translation adjustment

    -       -       -       -       476       476  

Comprehensive income

                                            15,987  

Balance at March 31, 2019

    26,846,981     $ 27     $ 259,611     $ 291,173     $ (8,016 )   $ 542,795  

Common shares issued on exercise of options and other, net of shares withheld for tax obligations

    75,785       -       245       -       -       245  

Stock-based compensation expense

    -       -       3,486       -       -       3,486  

Repurchases of common stock

    (40,669 )     -       (390 )     (3,711 )     -       (4,101 )

Net income

    -       -       -       16,166       -       16,166  

Other comprehensive income

                                               

Foreign currency translation adjustment

    -       -       -       -       (478 )     (478 )

Comprehensive income

                                            15,688  

Balance at June 30, 2019

    26,882,097     $ 27     $ 262,952     $ 303,628     $ (8,494 )   $ 558,113  
Common shares issued on exercise of options and other, net of shares withheld for tax obligations     5,089       -       241       -       -       241  
Stock-based compensation expense     -       -       3,212       -       -       3,212  
Repurchases of common stock     (128,077 )     -       (1,227 )     (10,884 )     -       (12,111 )
Net income     -       -       -       16,792       -       16,792  

Other comprehensive income

                                               
Foreign currency translation adjustment     -       -       -       -       (2,150 )     (2,150 )

Comprehensive income

                                            14,642  

Balance at September 30, 2019

    26,759,109     $ 27     $ 265,178     $ 309,536     $ (10,644 )   $ 564,097  

 

   

Common Stock

   

Additional

           

Accumulated Other

         
                   

Paid-In

   

Retained

   

Comprehensive

         
   

Shares

   

Amount

   

Capital

   

Earnings

   

Loss

   

Total

 
                                                 

Balance at January 1, 2018

    26,828,651       27       241,725       224,697       (5,234 )     461,215  

Common shares issued on exercise of options and other, net of shares withheld for tax obligations

    102,895       -       2,250       -       -       2,250  

Stock-based compensation expense

    -       -       2,307       -       -       2,307  

Repurchases of common stock

    -       -       -       -       -       -  

Revenue recognition transition adjustment

    -       -       -       1,460       -       1,460  

Net income

    -       -       -       18,051       -       18,051  

Other comprehensive income

                                               

Foreign currency translation adjustment

    -       -       -       -       2,393       2,393  

Comprehensive income

                                            20,444  

Balance at March 31, 2018

    26,931,546     $ 27     $ 246,282     $ 244,208     $ (2,841 )   $ 487,676  

Common shares issued on exercise of options and other, net of shares withheld for tax obligations

    94,848       -       1,054       -       -       1,054  

Stock-based compensation expense

    -       -       2,727       -       -       2,727  

Repurchases of common stock

    -       -       -       -       -       -  

Net income

    -       -       -       18,314       -       18,314  

Other comprehensive income

                                               

Foreign currency translation adjustment

    -       -       -       -       (3,518 )     (3,518 )

Comprehensive income

                                            14,796  

Balance at June 30, 2018

    27,026,394     $ 27     $ 250,063     $ 262,522     $ (6,359 )   $ 506,253  

Common shares issued on exercise of options and other, net of shares withheld for tax obligations

    41,674       -       1,942       -       -       1,942  

Stock-based compensation expense

    -       -       2,953       -       -       2,953  

Repurchases of common stock

    -       -       -       -       -       -  

Net income

    -       -       -       20,937       -       20,937  

Other comprehensive income

                                               

Foreign currency translation adjustment

    -       -       -       -       (879 )     (879 )

Comprehensive income

                                            20,058  

Balance at September 30, 2018

    27,068,068     $ 27     $ 254,958     $ 283,459     $ (7,238 )   $ 531,206  

 


 

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

 

 

 

Proto Labs, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 


 

   

Nine Months Ended

 
   

September 30,

 
   

2019

   

2018

 
                 

Operating activities

               

Net income

  $ 48,469     $ 57,302  

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

               
Depreciation and amortization     22,658       19,520  
Stock-based compensation expense     9,738       7,986  
Deferred taxes     1,599       1,770  
Gain on sale of businesses     -       (671 )
Amortization of held-to-maturity securities     (5 )     336  
Other     (133 )     160  

Changes in operating assets and liabilities:

               
Accounts receivable     (5,387 )     (8,993 )
Inventories     551       324  
Prepaid expenses and other     (162 )     (2,058 )
Income taxes     9,165       2,278  
Accounts payable     1,479       980  
Accrued liabilities and other     (4,193 )     6,028  

Net cash provided by operating activities

    83,779       84,962  
                 

Investing activities

               
Purchases of property, equipment and other capital assets     (46,151 )     (61,898 )
Cash used for acquisitions, net of cash acquired     -       (90 )
Proceeds from sale of business     -       284  
Purchases of other assets and investments     (4,000 )     (126 )
Purchases of marketable securities     (17,443 )     (41,384 )
Proceeds from maturities of marketable securities     54,352       44,721  

Net cash used in investing activities

    (13,242 )     (58,493 )
                 

Financing activities

               
Payments on debt     -       (5,000 )
Proceeds from exercises of stock options     2,486       7,269  
Purchases of shares withheld for tax obligations     (2,420 )     (2,021 )
Repurchases of common stock     (33,521 )     -  

Net cash (used in) provided by financing activities

    (33,455 )     248  
Effect of exchange rate changes on cash and cash equivalents     (560 )     (831 )

Net increase in cash and cash equivalents

    36,522       25,886  

Cash and cash equivalents, beginning of period

    85,046       36,707  

Cash and cash equivalents, end of period

  $ 121,568     $ 62,593  

 


 

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

 

 

 

Note 1 – Basis of Presentation

 

The unaudited interim Consolidated Financial Statements of Proto Labs, Inc. (Protolabs, 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. In the opinion of management, the accompanying financial statements reflect all adjustments necessary for a fair presentation of the Company’s statements 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, 2018 as filed with the Securities and Exchange Commission (SEC) on February 22, 2019.

 

The accompanying Consolidated Balance Sheet as of December 31, 2018 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 22, 2019 as referenced above.

  

 

 

Note 2 – Recent Accounting Pronouncements

 

Recently Adopted Accounting Pronouncements

 

During the first quarter of 2019, the Company adopted the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-02, Leases (ASC 842), 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 Company has adopted the new lease standard using the new transition option issued under the amendments in ASU 2018-11, Leases, which allowed the Company to continue to apply the legacy guidance in Accounting Standards Codification (ASC) 840, Leases, in the comparative periods presented in the year of adoption. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification. The Company made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet. The Company will recognize those lease payments in the Consolidated Statements of Comprehensive Income on a straight-line basis over the lease term. The impact of the adoption was an increase to the Company’s operating lease assets and liabilities on January 1, 2019 of $13.1 million.

 

Recently Issued Accounting Pronouncements

 

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other, which is intended to simplify the subsequent measurement of goodwill. This guidance will be effective for impairment tests in fiscal years beginning after December 15, 2019 and interim periods within those fiscal years with early adoption permitted. The Company does not expect the impact to be material.

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses, which is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments held by a reporting entity at each reporting date. This guidance will be effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years with early adoption permitted. The Company is evaluating the impact of future adoption of this guidance on its consolidated financial statements, but does not expect the impact to be material.  

 

 

 

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. Performance stock units are excluded from the calculation of dilutive potential common shares until the performance conditions have been satisfied.

 

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

 


 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30,

   

September 30,

 

(in thousands, except share and per share amounts)

 

2019

   

2018

   

2019

   

2018

 

Net income

  $ 16,792     $ 20,937     $ 48,469     $ 57,302  
                                 

Basic - weighted-average shares outstanding:

    26,846,030       27,038,585       26,894,420       26,963,205  

Effect of dilutive securities:

                               

Employee stock options and other

    159,311       299,301       178,453       305,106  

Diluted - weighted-average shares outstanding:

    27,005,341       27,337,886       27,072,873       27,268,311  

Net income per share:

                               
Basic   $ 0.63     $ 0.77     $ 1.80     $ 2.13  
Diluted   $ 0.62     $ 0.77     $ 1.79     $ 2.10  

 


 

6

 

 

Note 4 – Goodwill and Other Intangible Assets

 

There were no changes in the carrying amount of Goodwill during the three and nine months ended September 30, 2019.

 

Intangible assets other than goodwill at  September 30, 2019 and December 31, 2018 were as follows:

 


 

   

September 30, 2019

   

December 31, 2018

   

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     $ (504 )   $ 426     $ 930     $ (434 )   $ 496     10.0     4.6

Non-compete agreement

    270       (218 )     52       270       (206 )     64     2.0 - 5.0     3.3

Trade secrets

    250       (250 )     -       250       (233 )     17     5.0     0.0

Trade names

    1,080       (945 )     135       1,080       (540 )     540     2.0     0.3

Software technology

    13,229       (1,933 )     11,296       12,229       (997 )     11,232     10.0     8.3

Customer relationships

    10,070       (3,721 )     6,349       10,070       (2,569 )     7,501     6.0 - 9.0     4.1

Total intangible assets

  $ 25,829     $ (7,571 )   $ 18,258     $ 24,829     $ (4,979 )   $ 19,850            

 


 

Amortization expense for intangible assets was $0.9 million and $0.8 million for the three months ended  September 30, 2019 and 2018, respectively, and $2.6 million and $2.4 million for the nine months ended September 30, 2019 and 2018, respectively.

 

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

 


 

(in thousands)

 

Estimated
Amortization Expense

 
Remaining 2019   $ 889  
2020     3,016  
2021     3,016  
2022     3,016  
2023     2,813  
Thereafter     5,508  

Total estimated amortization expense

  $ 18,258  

 


 

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 that 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.

 

The following table summarizes financial assets as of September 30, 2019 and December 31, 2018 measured at fair value on a recurring basis: 

 


 

   

September 30, 2019

   

December 31, 2018

 

(in thousands)

 

Level 1

   

Level 2

   

Level 3

   

Level 1

   

Level 2

   

Level 3

 

Financial Assets:

                                               

Cash and cash equivalents

                                               
Money market mutual fund   $ 58,563     $ -     $ -     $ 8,943     $ -     $ -  

Total

  $ 58,563     $ -     $ -     $ 8,943     $ -     $ -  

 


 

 

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. The following table summarizes information regarding the Company’s short-term and long-term marketable securities as of September 30, 2019 and December 31, 2018:

 


 

   

September 30, 2019

 

(in thousands)

 

Cost

   

Unrealized Gains

   

Unrealized Losses

   

Fair Value

 
U.S. municipal securities   $ 5,612     $ 11     $ (3 )   $ 5,620  
Corporate debt securities     16,503       100       (1 )     16,602  
U.S. government agency securities     8,340       1       (10 )     8,331  
Certificates of deposit/time deposits     1,479       22       (1 )     1,500  
Commercial paper     1,491       -       (1 )     1,490  

Total marketable securities

  $ 33,425     $ 134     $ (16 )   $ 33,543  

 


 

8

 


 

   

December 31, 2018

 

(in thousands)

 

Cost

   

Unrealized Gains

   

Unrealized Losses

   

Fair Value

 

U.S. municipal securities

  $ 17,509     $ 1     $ (33 )   $ 17,477  

Corporate debt securities

    31,769       -       (96 )     31,673  

U.S. government agency securities

    16,843       -       (88 )     16,755  

Certificates of deposit/time deposits

    4,208       -       (25 )     4,183  

Total marketable securities

  $ 70,329     $ 1     $ (242 )   $ 70,088  

 


 

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 U.S. treasury securities 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 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 September 30, 2019 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.

 


 

   

September 30,

 

(in thousands)

 

2019

 

Due in one year or less

  $ 23,642  

Due after one year through five years

    9,783  

Total marketable securities

  $ 33,425  

 


 

 

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:

 


 

   

September 30,

   

December 31,

 

(in thousands)

 

2019

   

2018

 
Raw materials   $ 9,328     $ 9,560  
Work in process     304       792  

Total inventory

    9,632       10,352  
Allowance for obsolescence     (184 )     (265 )

Inventory, net of allowance

  $ 9,448     $ 10,087  

 


 

 

 

Note 8 – Leases

 

The Company’s significant accounting policies are disclosed in Note 2 to the Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2018. Significant changes to the Company’s accounting policies as a result of adopting ASC 842 are discussed below.

 

The Company accounts for leases in accordance with ASC 842. The Company adopted the standard as of  January 1, 2019, using the alternative transition method provided under ASC 842, which allowed the Company to initially apply the new lease standard at the adoption date (the "effective date method"). Under the effective date method, comparative periods are presented in accordance with ASC 840 and do not include any retrospective adjustments to reflect the adoption of ASC 842. The Company elected the package of practical expedients permitted under the transition guidance within the new standard. The Company did not elect the hindsight practical expedient. The Company recorded a net increase of $13.1 million to its operating lease assets and liabilities on January 1, 2019. The adoption did not result in a cumulative-effect adjustment to the opening balance of retained earnings. The adoption of ASC 842 did not have a material impact on the Company's consolidated statements of comprehensive income, shareholders' equity or cash flows as of the adoption date.

 

The Company has operating leases for office space, manufacturing facilities and certain company vehicles and equipment. The leases have remaining lease terms of one year to 10 years. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. As of September 30, 2019, the operating lease liability does not include any options to extend or terminate leases. The Company currently has no finance leases.

 

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease assets, current operating lease liabilities and long-term operating lease liabilities in the Consolidated Balance Sheets and are recognized based on the present value of lease payments over the lease term at commencement date. The majority of the Company’s leases do not provide an implicit rate of return, therefore, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease agreements that contain non-lease components, with the exception of certain real estate leases, are accounted for as a single lease component.

 

Supplemental balance sheet information related to leases was as follows:

 


 

(in thousands)

 

September 30, 2019

 
Operating lease assets   $ 12,008  
         
Current operating lease liabilities   $ 3,364  
Long-term operating lease liabilities     9,006  

Total operating lease liabilities

  $ 12,370  

 


 

Lease expense is recognized on a straight-line basis over the lease term, with variable payments recognized in the period those payments are incurred. The components of lease expense for the periods reported were as follows:

 


 

(in thousands)

 

Three Months Ended

September 30, 2019

   

Nine Months Ended

September 30, 2019

 
Operating lease cost   $ 967     $ 2,984  
Variable lease cost     306       811  

Total lease cost

  $ 1,273     $ 3,795  

 


 

 

Maturities of operating lease liabilities as of September 30, 2019 (in accordance with ASC 842) were as follows:

 


 

(in thousands)

 

Operating Leases

 

Year Ending December 31,

       
2019 (excluding nine months ended September 30, 2019)   $ 1,216  
2020     3,514  
2021     2,770  
2022     2,580  
2023     1,041  
After 2023     2,050  

Total future minimum lease payments

    13,171  
Less interest     (801 )

Present value of lease liabilities

  $ 12,370  

 


 

As of September 30, 2019, we have no operating leases that have not yet commenced.

 

Weighted average remaining lease term and discount rate was as follows: 

 


 

   

September 30, 2019

 

Weighted Average Remaining Lease Term (Years)

    4.8  

Weighted Average Discount Rate

    2.6 %

 


 

Supplemental cash flow information related to leases was as follows:

 


 

(in thousands)

 

Nine Months Ended

September 30, 2019

 

Cash paid for amounts included in the measurement of operating lease liabilities:

       
Operating cash flows for operating leases   $ 3,878  
Lease assets obtained in exchange for new operating lease liabilities     1,837  

 


 

 

 

 

Note 9 – Stock-Based Compensation

 

Under the Company’s 2012 Long-Term Incentive Plan, as amended (the 2012 Plan), the Company has the ability to grant stock options, stock appreciation rights (SARs), restricted stock, restricted 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 award 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 a variable number of shares of the Company’s common stock each offering period 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 with a single purchase period 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 $3.2 million and $3.0 million for the three months ended September 30, 2019 and 2018, respectively, and $9.7 million and $8.0 million for the nine months ended September 30, 2019 and 2018, respectively.

 

Stock Options

 

The following table summarizes stock option activity during the nine months ended September 30, 2019:

 


 

           

Weighted-

 
           

Average

 
   

Stock Options

   

Exercise Price

 

Options outstanding at December 31, 2018

    252,616     $ 64.71  
Granted     53,708       105.81  
Exercised     (11,921 )     56.25  
Forfeited     (10,833 )     83.74  
Options outstanding at September 30, 2019     283,570     $ 72.12  
                 
Exercisable at September 30, 2019     154,539     $ 58.18  

 


 

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 period from four to five years, 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 nine months ended September 30, 2019 was $47.84.

 

The following table provides the assumptions used in the Black-Scholes pricing model valuation of options during the nine months ended September 30, 2019 and 2018:

 


 

   

Nine Months Ended September 30,

 
   

2019

   

2018

 

Risk-free interest rate

  2.35 - 2.58%     2.52 - 3.07%  

Expected life (years)

  6.25     6.25  

Expected volatility

  42.52 - 42.74%     41.68 - 42.22%  

Expected dividend yield

  0%     0%  

 


 

As of September 30, 2019, there was $4.2 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.8 years.

 

 

Restricted Stock

 

Restricted stock awards are share-settled awards and restrictions lapse ratably over the vesting period, which is generally a period from four to five years, 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. 

 

The following table summarizes restricted stock activity during the nine months ended September 30, 2019:

 


 

           

Weighted-

 
           

Average

 
           

Grant Date

 
   

Restricted

   

Fair Value

 
   

Stock

   

Per Share

 

Restricted stock at December 31, 2018

    323,921     $ 79.85  
Granted     114,467       106.41  
Restrictions lapsed     (95,884 )     79.32  
Forfeited     (20,299 )     86.54  
Restricted stock at September 30, 2019     322,205     $ 89.02  

 


 

As of September 30, 2019, there was $24.4 million of unrecognized compensation expense related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of 2.8 years. 

 

13

 

 

Performance Stock

 

Performance stock units (PSUs) are expressed in terms of a target number of PSUs, with anywhere between 0 percent and 150 percent of that target number capable of being earned and vesting at the end of a three-year performance period depending on the Company’s performance in the final year of the performance period and the award recipient’s continued employment.

 

The following table summarizes performance stock activity during the nine months ended September 30, 2019:

 


 

           

Weighted-

 
           

Average

 
           

Grant Date

 
   

Performance

   

Fair Value

 
   

Stock

   

Per Share

 

Performance stock at December 31, 2018

    52,140     $ 76.54  

Granted

    21,434       104.99  

Restrictions lapsed

    -       -  

Performance change

    (12,854 )     58.35  

Forfeited

    (2,375 )     105.37  

Performance stock at September 30, 2019

    58,345     $ 89.82  

 


 

As of September 30, 2019, there was $2.7 million of unrecognized compensation expense related to non-vested performance stock, which is expected to be recognized over a weighted-average period of 1.9 years. 

 

Employee Stock Purchase Plan

 

The following table presents the assumptions used to estimate the fair value of the ESPP during the nine months ended September 30, 2019 and 2018

 


 

   

Nine Months Ended September 30,

 
   

2019

   

2018

 

Risk-free interest rate

  2.33 - 2.35%     1.48 - 2.06%  

Expected life (months)

  6.00     6.00  

Expected volatility

  37.36 - 53.57%     24.49 - 31.50%  

Expected dividend yield

  0%     0%  

 


 

14

 

 

 

 Note 10 – Accumulated Other Comprehensive 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 and nine months ended September 30, 2019 and 2018:

 


 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30,

   

September 30,

 

(in thousands)

 

2019

   

2018

   

2019

   

2018

 

Foreign currency translation adjustments

                               
Balance at beginning of period   $ (8,494 )