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TASER International Reports Second Quarter Results

Tue, 07/27/2010 - 4:13am
The Associated Press

TASER International, Inc. (NASDAQ: TASR) today announced financial results for the second quarter of 2010.

Q2 2010 Financial Summary:

Significant events in the second quarter of 2010 included the following:

"While sales in the second quarter were not as strong as we had originally hoped, we remain optimistic about a number of significant international opportunities that are expected to come to fruition in the second half of 2010," commented Rick Smith, CEO of TASER International. "Looking ahead, we will continue to make strategic investments for growth, while remaining focused on cost control. The Company addressed its fixed cost infrastructure by eliminating a number of salaried positions in late Q1 and during Q2, representing approximately $3 million in annual salary and benefit costs. While these were difficult measures to take, the Company remains committed to returning to profitability. Our strategy to further diversify our business remains on track, as we continue to provide customers with market-leading defense solutions, while also providing innovative software solutions to law enforcement agencies through Evidence.com, and to our retail customer base through our new Protector software. We believe the ramp up of these platforms, along with the AXON and other TASER@ Electronic Control Device products will accelerate in 2011 and position the Company for strong top-line growth in the years ahead."

The Company will host its second quarter 2010 earnings conference call on Tuesday, July 27, 2010 at 11:00 a.m. ET. To access the audio teleconference, please dial: 1-866-383-7989 or 1-617-597-5328 for international callers. The pass code is 90164649 for both numbers.

Non-GAAP Measures

To supplement the Company's Statements of Operations presented in accordance with GAAP, we are presenting non-GAAP measures of certain components of financial performance. We have presented these measures for our investors to be better able to compare our current results with those of previous periods and have shown a reconciliation of GAAP to the non-GAAP financial measures in the tables at the end of this release. These non-GAAP measures include the impact of non-cash stock-based compensation expense, depreciation and amortization. We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenses and expenditures that may not be indicative of our "recurring core business operating results," meaning our operating performance excluding non-cash charges, such as stock-based compensation, depreciation and amortization and other discrete charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to our historical performance and liquidity.

Caution on Use of Non-GAAP Measures

As noted previously, these non-GAAP financial measures are not consistent with GAAP because they do not reflect the impact of other non-cash charges. Management believes investors will benefit from greater transparency in referring to these non-GAAP financial measures when assessing the Company's operating results, as well as when forecasting and analyzing future periods. However, management recognizes that:

Further, these non-GAAP financial measures may be unique to the Company, as they may be different from non-GAAP financial measures used by other companies. As such, this presentation of non-GAAP financial measures may not enhance the comparability of the Company's results to the results of other companies.

A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure or measures appears at the end of this press release.

About TASER International, Inc.

TASER International, Inc., is the global leader in the development of technologies that Protect Life. More than 15,000 public safety agencies protect and serve in more than 40 countries with TASER technology. TASER innovations benefit individuals and families too; providing personal protection and accountability while maintaining regard for life. TASER is committed to bringing advanced solutions to market, like TASER AXON and EVIDENCE.COM -- powerful evidence capturing and management platforms. Learn more about TASER International and its products at www.TASER.com (http://www.taser.com/) or by calling (800) 978-2737.

Note to Investors

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including statements, without limitation, regarding our expectations, beliefs, intentions or strategies regarding the future. We intend that such forward-looking statements be subject to the safe-harbor provided by the Private Securities Litigation Reform Act of 1995. The forward-looking information is based upon current information and expectations regarding TASER International, Inc. These estimates and statements speak only as of the date on which they are made, are not guarantees of future performance, and involve certain risks, uncertainties and assumptions that are difficult to predict. Such forward-looking statements relate to: expected revenue and earnings growth; estimations regarding the size of our target markets; successful penetration of the law enforcement market; expansion of product sales to the private security, military and consumer self-defense markets; growth expectations for new and existing accounts; expansion of production capability; new product introductions; product safety and our business model. We caution that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements herein.

TASER International assumes no obligation to update the information contained in this press release. These statements are qualified by important factors that could cause our actual results to differ materially from those reflected by the forward-looking statements. Such factors include but are not limited to: (1) market acceptance of our products; (2) our ability to establish and expand direct and indirect distribution channels; (3) our ability to attract and retain the endorsement of key opinion-leaders in the law enforcement community; (4) the level of product technology and price competition for our products; (5) the degree and rate of growth of the markets in which we compete and the accompanying demand for our products; (6) risks associated with rapid technological change and new product introductions; (7) competition; (8) litigation including lawsuits resulting from alleged product related injuries and death; (9) media publicity concerning allegations of deaths and injuries occurring after use of the TASER device and the negative effect this publicity could have on our sales; (10) TASER device tests and reports; (11) product quality; (12) implementation of manufacturing automation; (13) potential fluctuations in our quarterly operating results; (14) financial and budgetary constraints of prospects and customers; (15) potential delays in international and domestics orders; (16) dependence upon sole and limited source suppliers; (17) negative reports concerning the TASER device; (18) fluctuations in component pricing; (19) government regulations and inquiries; (20) dependence upon key employees and our ability to retain employees; (21) execution and implementation risks of new technology; (22) ramping manufacturing production to meet demand; (23) medical and safety studies; (24) field test results; and (25) other factors detailed in our filings with the Securities and Exchange Commission, including, without limitation, those factors detailed in the Company's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q.

For investor relations information please contact Katie Pyra by phone at 480-515-6330 or via email at IR@TASER.com (mailto:IR@TASER.com) , or Dan Behrendt, Chief Financial Officer of TASER International, Inc., 480-905-2002.

TASER International, Inc.

Consolidated Statements of Operations

(Unaudited)

For the Three Months Ended

-----------------------------

June 30, 2010 June 30, 2009

------------- ------------- Net Sales $ 19,120,525 $ 21,833,398

------------- ------------- Cost of Products Sold: Direct manufacturing expense 5,969,177 5,804,463 Indirect manufacturing expense 3,520,638 2,290,207

------------- ------------- Total Cost of Products Sold 9,489,815 8,094,670

------------- ------------- Gross Margin 9,630,710 13,738,728 Sales, general and administrative expenses 10,011,395 10,821,238 Research and development expenses 3,055,049 4,392,259

------------- ------------- Loss from operations (3,435,734) (1,474,769) Interest and other income, net 6,203 47,375

------------- ------------- Loss before benefit for income taxes (3,429,531) (1,427,394) Benefit for income taxes (2,070,142) (703,991)

------------- ------------- Net loss $ (1,359,389) $ (723,403)

Income per common and common equivalent shares Basic $ (0.02) $ (0.01) Diluted $ (0.02) $ (0.01) Weighted average number of common and common

equivalent shares outstanding Basic 62,333,929 61,907,735 Diluted 62,333,929 61,907,735

TASER International, Inc.

Consolidated Statements of Operations

(Unaudited)

For the Six Months Ended

-----------------------------

June 30, 2010 June 30, 2009

------------- ------------- Net Sales $ 42,964,426 $ 46,438,178

------------- ------------- Cost of Products Sold: Direct manufacturing expense 13,229,225 12,709,130 Indirect manufacturing expense 6,614,070 5,361,069

------------- ------------- Total Cost of Products Sold 19,843,295 18,070,199

------------- ------------- Gross Margin 23,121,131 28,367,979 Sales, general and administrative expenses 20,310,549 22,270,161 Research and development expenses 7,194,965 8,590,228

------------- ------------- Loss from operations (4,384,383) (2,492,410) Interest and other income, net 14,102 142,050

------------- ------------- Loss before benefit for income taxes (4,370,281) (2,350,360) Benefit for income taxes (2,518,287) (1,159,198)

------------- ------------- Net Loss $ (1,851,994) $ (1,191,162)

Loss per common and common equivalent shares Basic $ (0.03) $ (0.02) Diluted $ (0.03) $ (0.02) Weighted average number of common and common equivalent shares outstanding Basic 62,450,722 61,869,558 Diluted 62,450,722 61,869,558

TASER International, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

For the Three Months Ended For the Six Months Ended

---------------------------- ----------------------------

June 30, 2010 June 30, 2009 June 30, 2010 June 30, 2009

------------- ------------- ------------- ------------- GAAP loss from

operations $ (3,435,734) $ (1,474,769) $ (4,384,383) $ (2,492,410)

Stock-based

compensation

expense (a) 916,626 1,384,282 1,926,220 2,759,319

Depreciation

and

amortization 1,588,171 769,079 3,128,328 1,483,887

------------- ------------- ------------- ------------- Adjusted

operating

income $ (930,937) $ 678,592 $ 670,165 $ 1,750,796

a) Results include stock-based compensation as follows: For the Three Months Ended For the Six Months Ended

---------------------------- ----------------------------

June 30, 2010 June 30, 2009 June 30, 2010 June 30, 2009

------------- ------------- ------------- ------------- Cost of Products

Sold $ 80,476 $ 98,975 $ 151,985 $ 198,363 Sales, general

and

administrative

expenses 724,464 812,945 1,522,591 1,627,019 Research and

development

expenses 111,686 472,362 251,644 933,937

------------- ------------- ------------- -------------

$ 916,626 $ 1,384,282 $ 1,926,220 $ 2,759,319

TASER International, Inc.

Consolidated Balance Sheets

(Unaudited)

June 30, December 31,

2010 2009

------------- -------------

ASSETS Current Assets Cash and cash equivalents $ 40,599,254 $ 45,505,049 Accounts receivable, net 11,031,429 15,384,993 Inventory 19,076,431 15,085,750 Prepaids and other assets 3,433,812 1,461,539 Current deferred income tax assets, net 9,875,312 8,447,915

------------- ------------- Total current assets 84,016,238 85,885,246 Property and equipment, net 38,825,981 38,673,065 Deferred income tax assets, net 10,997,093 10,997,093 Intangible assets, net 2,863,058 2,765,701 Other long-term assets 838,465 104,812

------------- ------------- Total Assets $ 137,540,835 $ 138,425,917

LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 4,636,465 $ 6,357,195 Accrued liabilities 4,174,424 4,252,577 Current deferred revenue 3,176,471 2,819,155 Customer deposits 250,133 355,926

------------- ------------- Total Current Liabilities 12,237,493 13,784,853 Deferred revenue, net of current portion 4,437,128 4,675,089 Liability for unrecorded tax benefits 2,199,620 2,264,779

------------- ------------- Total Liabilities 18,874,241 20,724,721

------------- ------------- Commitments and Contingencies Stockholders' Equity Common stock 647 642 Additional paid-in capital 95,726,417 92,839,165 Treasury stock (14,708,237) (14,708,237) Retained earnings 37,717,632 39,569,626 Accumulated other comprehensive income (69,865) -

------------- ------------- Total Stockholders' Equity 118,666,594 117,701,196

------------- ------------- Total Liabilities and Stockholders' Equity $ 137,540,835 $ 138,425,917

TASER International, Inc.

Selected Consolidated Statement of Cash Flows Information

(Unaudited)

For the Six Months Ended

June 30, 2010 June 30, 2009

------------- ------------- Net loss $ (1,851,994) $ (1,191,162) Depreciation and amortization 3,128,328 1,483,887 Stock-based compensation expense 1,926,220 2,759,319 Net cash (used) provided by operating

activities (2,453,789) 8,180,329 Net cash (used) provided by investing

activities (3,413,043) (2,347,915) Net cash provided by financing activities 961,037 60,890 Cash and cash equivalents, end of period $ 40,599,254 $ 52,773,739

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