Stratasys Reports Record Quarterly Revenue and Non-GAAP Net Income

Non-GAAP Discussion

The information discussed within this release includes financial results and projections that are in accordance with accounting principles generally accepted in the United States (GAAP). In addition, certain non-GAAP financial measures have been provided that exclude certain charges, expenses and income. The non-GAAP measures should be read in conjunction with the corresponding GAAP measures and should be considered in addition to, and not as an alternative or substitute for, the measures prepared in accordance with GAAP. The non-GAAP financial measures are provided in an effort to provide information that investors may deem relevant to evaluate results from the company’s core business operations and to compare the company’s performance with prior periods. The non-GAAP financial measures primarily identify and exclude certain discrete items, such as Objet transaction-related expenses, amortization expenses and expenses associated with stock-based compensation required under ASC 718. The company uses these non-GAAP financial measures for evaluating comparable financial performance against prior periods.

This release is available on the Stratasys web site at www.stratasys.com

Additional information on the Emma Lavelle story can be accessed at http://www.stratasys.com/Resources/Case-Studies/Medical-FDM-Technology-Case-Studies/Nemours.aspx

Important Information for Investors and Shareholders

In connection with the proposed combination of Objet and Stratasys pursuant to an Agreement and Plan of Merger (the “Merger”), Objet has filed with the Securities and Exchange Commission (the “SEC”) a registration statement on Form F-4, which includes a proxy statement of Stratasys and a prospectus of Objet, as well as other relevant materials in connection with the proposed transaction. Stratasys concurrently filed the same proxy statement/prospectus with the SEC and has mailed it to Stratasys shareholders for purposes of soliciting proxies for voting in favor of the Merger at a special meeting of Stratasys stockholders called for the purpose of approving the Merger Agreement and the Merger. INVESTORS AND STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT MATERIALS, BECAUSE THESE MATERIALS CONTAIN IMPORTANT INFORMATION ABOUT STRATASYS, OBJET AND THE PROPOSED TRANSACTION. The proxy statement/prospectus and other relevant materials and any other related documents filed with the SEC may be obtained free of charge on the SEC’s website at www.sec.gov or via the Stratasys website at www.stratasys.com. Stockholders may also obtain a copy of the SEC filings free of charge upon written request to Stratasys, Attention: Shane Glenn, Director of Investor Relations, 7665 Commerce Way, Eden Prairie, Minnesota 55344.

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

About Stratasys

Stratasys Inc., Minneapolis, is a maker of additive manufacturing machines for prototyping and producing plastic parts. The company markets under the brands Mojo, uPrint and Dimension 3D Printers and Fortus Production 3D Printers. The company also operates RedEye On Demand, a digital-manufacturing service for prototypes and production parts. In 2011 Stratasys acquired 3D printer maker Solidscape Inc. According to Wohlers Report 2012, Stratasys had a 41.5 percent market share in 2011, and has been the unit market leader for the tenth consecutive year. Stratasys patented and owns the Fused Deposition Modeling (FDM^®) process. The process creates functional prototypes and manufactured goods directly from any 3D CAD program, using high-performance industrial thermoplastics. The company holds 380 granted or pending additive manufacturing patents globally. Stratasys products are used in the aerospace, defense, automotive, medical, business and industrial equipment, education, architecture, and consumer-product industries. Online at: www.Stratasys.com

Stratasys, Fortus, Dimension, and uPrint are registered trademarks, and Mojo is a trademark, of Stratasys Inc.


STRATASYS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(unaudited)			(unaudited)			(unaudited)			(unaudited)

Net sales
Products	$	41,317,863		$	32,512,544		$	120,301,057		$	91,273,133
Services		8,405,612			7,440,470			23,791,947			21,048,816
		49,723,475			39,953,014			144,093,004			112,321,949

Cost of sales
Products		17,563,569			15,284,820			54,692,340			43,752,872
Services		4,203,443			3,114,248			12,328,692			9,029,273
		21,767,012			18,399,068			67,021,032			52,782,145

Gross profit		27,956,463			21,553,946			77,071,972			59,539,804

Operating expenses
Research and development		4,066,846			3,613,668			12,576,094			10,687,578
Selling, general and administrative		14,780,526			10,083,451			42,365,253			28,738,325
		18,847,372			13,697,119			54,941,347			39,425,903

Operating income		9,109,091			7,856,827			22,130,625			20,113,901

Other income (expense)
Interest income, net		229,003			276,089			672,052			698,469
Foreign currency transaction losses, net		(72,586	)		(217,857	)		(265,141	)		(429,840	)
Other, net		7,021			755,030			109,922			2,264,307
		163,438			813,262			516,833			2,532,936

Income before income taxes		9,272,529			8,670,089			22,647,458			22,646,837

Income tax expense		4,089,393			2,812,920			9,924,615			7,806,524

Net income	$	5,183,136		$	5,857,169		$	12,722,843		$	14,840,313

Earnings per common share
Basic	$	0.24		$	0.28		$	0.60		$	0.70
Diluted	$	0.24		$	0.27		$	0.58		$	0.68

Weighted average number of common shares outstanding
Basic		21,467,606			21,165,401			21,348,967			21,107,474
Diluted		22,008,471			21,542,674			21,856,719			21,669,848


Note: Certain reclassifications have been made to prior period balances to conform to current period presentation.


STRATASYS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	September 30,			December 31,
	2012			2011
	(unaudited)

ASSETS

Current assets
Cash and cash equivalents	$	27,899,789		$	20,092,200
Short-term investments - held to maturity		23,900,469			14,602,408
Accounts receivable, less allowance for doubtful accounts of $773,000 at September 30, 2012 and $1,089,000 at December 31, 2011		35,865,540			26,230,289
Inventories		32,079,430			22,771,460
Net investment in sales-type leases, less allowance for doubtful accounts of $302,000 at September 30, 2012 and $230,000 at December 31, 2011		4,249,410			3,295,039
Prepaid expenses and other current assets		2,193,015			3,259,012
Deferred income taxes		2,973,000			2,973,000
Total current assets		129,160,653			93,223,408

Property and equipment, net		44,887,880			39,669,433

Other assets
Goodwill		25,388,731			25,393,967
Other Intangible assets, net		24,150,718			25,295,032
Net investment in sales-type leases		7,249,832			5,494,753
Long-term investments - held to maturity		13,915,821			32,581,472
Other non-current assets		145,652			112,300
Total other assets		70,850,754			88,877,524

Total assets	$	244,899,287		$	221,770,365

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable and other current liabilities	$	21,628,011		$	19,368,197
Unearned revenues		9,968,263			9,768,610
Total current liabilities		31,596,274			29,136,807

Non-current liabilities
Deferred tax liabilities		6,760,000			6,760,000
Unearned revenues - long-term		2,662,953			2,562,195

Total liabilities		41,019,227			38,459,002

Commitments and contingencies

Stockholders' equity
Common stock, $.01 par value, authorized 30,000,000 shares; 27,501,216 and 26,933,301 issued at September 30, 2012 and December 31, 2011, respectively		275,012			269,333
Additional paid-in capital		125,951,072			118,134,006
Retained earnings		116,734,701			104,011,848
Accumulated other comprehensive loss		(76,300	)		(99,399	)
Treasury stock at cost, 5,687,631 shares at September 30, 2012 and December 31, 2011		(39,004,425	)		(39,004,425	)
Total stockholders' equity		203,880,060			183,311,363

Total liabilities and stockholders' equity	$	244,899,287		$	221,770,365


Note: Certain reclassifications have been made to prior period balances to conform to current period presentation.


STRATASYS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP TO GAAP RESULTS OF OPERATIONS


	Three Months Ended September 30, 2012										Three Months Ended September 30, 2011
	As Reported							Non-GAAP			As Reported							Non-GAAP
	(unaudited)			Adjustments				(unaudited)			(unaudited)			Adjustments				(unaudited)

Net sales
Products	$	41,317,863		$	-			$	41,317,863		$	32,512,544		$	-			$	32,512,544
Services		8,405,612			-				8,405,612			7,440,470			-				7,440,470
		49,723,475			-				49,723,475			39,953,014			-				39,953,014

Cost of sales
Products		17,563,569			(507,012	)	(a)		17,056,557			15,284,820			(436,012	)	(d)		14,848,808
Services		4,203,443			-				4,203,443			3,114,248			-				3,114,248
		21,767,012			(507,012	)			21,260,000			18,399,068			(436,012	)			17,963,056

Gross profit		27,956,463			507,012				28,463,475			21,553,946			436,012				21,989,958

Operating expenses
Research and development		4,066,846			-				4,066,846			3,613,668			-				3,613,668
Selling, general and administrative		14,780,526			(3,410,994	)	(b)		11,369,532			10,083,451			(574,162	)	(e)		9,509,289
		18,847,372			(3,410,994	)			15,436,378			13,697,119			(574,162	)			13,122,957

Operating income		9,109,091			3,918,006				13,027,097			7,856,827			1,010,174				8,867,001

Other income (expense)
Interest income, net		229,003			-				229,003			276,089			-				276,089
Foreign currency transaction losses, net		(72,586	)		-				(72,586	)		(217,857	)		-				(217,857	)
Other, net		7,021			-				7,021			755,030			(626,188	)	(f)		128,842
		163,438			-				163,438			813,262			(626,188	)			187,074

Income before income taxes		9,272,529			3,918,006				13,190,535			8,670,089			383,986				9,054,075

Income tax expense		4,089,393			376,723		(c)		4,466,116			2,812,920			89,362		(c)		2,902,282

Net income	$	5,183,136		$	3,541,283			$	8,724,419		$	5,857,169		$	294,624			$	6,151,793

Earnings per common share
Basic	$	0.24		$	0.16			$	0.41		$	0.28		$	0.01			$	0.29
Diluted	$	0.24		$	0.16			$	0.40		$	0.27		$	0.01			$	0.29

Weighted average number of common shares outstanding
Basic		21,467,606							21,467,606			21,165,401							21,165,401
Diluted		22,008,471							22,008,471			21,542,674							21,542,674

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