Stratasys Reports Record Second Quarter Financial Results

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

Additional information on the Mojo and 3Z PRO 3D printers can be accessed at www.mojo3dprinting.com; http://www.mojo3dprinting.com/printers/videos.aspx; and http://www.solid-scape.com/news/press-releases/new-3d-printing-system-solidscape.

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 will mail 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.

Stratasys’ executive officers and directors may be deemed to be participants in the solicitation of proxies from the stockholders of Stratasys in connection with the Merger. Information about Stratasys’ executive officers and directors and their ownership of Stratasys common stock is set forth in Amendment No. 1 to Stratasys’ Annual Report on Form 10-K for the year ended December 31, 2011, which was filed with the SEC on April 27, 2012.

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 June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(unaudited)			(unaudited)			(unaudited)			(unaudited)

Net sales
Products	$	41,443,572		$	30,664,384		$	78,987,247		$	58,760,588
Services		7,961,855			7,126,422			15,382,282			13,608,346
		49,405,427			37,790,806			94,369,529			72,368,934

Cost of sales
Products		18,650,930			14,982,787			36,286,970			28,468,051
Services		4,595,285			3,072,613			8,967,050			5,915,025
		23,246,215			18,055,400			45,254,020			34,383,076

Gross profit		26,159,212			19,735,406			49,115,509			37,985,858

Operating expenses
Research and development		4,157,088			3,725,817			8,509,248			7,073,910
Selling, general and administrative		16,209,680			9,918,643			27,584,472			18,654,882
		20,366,768			13,644,460			36,093,720			25,728,792

Operating income		5,792,444			6,090,946			13,021,789			12,257,066

Other income (expense)
Interest income, net		192,622			216,599			443,048			422,380
Foreign currency transaction losses, net		(140,218	)		(80,868	)		(192,555	)		(211,983	)
Other, net		6,630			112,671			102,901			1,509,285
		59,034			248,402			353,394			1,719,682

Income before income taxes		5,851,478			6,339,348			13,375,183			13,976,748

Income tax expense		2,833,852			2,345,699			5,835,222			4,993,604

Net income	$	3,017,626		$	3,993,649		$	7,539,961		$	8,983,144

Earnings per common share
Basic	$	0.14		$	0.19		$	0.35		$	0.43
Diluted	$	0.14		$	0.18		$	0.35		$	0.41

Weighted average number of common shares outstanding
Basic		21,312,471			21,145,458			21,289,002			21,078,045
Diluted		21,834,318			21,789,520			21,799,629			21,718,985


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

STRATASYS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	June 30,			December 31,
	2012			2011
	(unaudited)

ASSETS

Current assets
Cash and cash equivalents	$	26,968,072		$	20,092,200
Short-term investments - held to maturity		24,191,472			14,602,408
Accounts receivable, less allowance for doubtful accounts of $1,145,000 at June 30, 2012 and $1,089,000 at December 31, 2011		33,484,094			26,230,289
Inventories		22,524,798			22,771,460
Net investment in sales-type leases, less allowance for doubtful accounts of $214,000 at June 30, 2012 and $230,000 at December 31, 2011		4,747,067			3,295,039
Prepaid expenses and other current assets		2,118,213			3,259,012
Deferred income taxes		2,973,000			2,973,000
Total current assets		117,006,716			93,223,408

Property and equipment, net		44,986,430			39,669,433

Other assets
Goodwill		25,375,310			25,393,967
Other Intangible assets, net		24,618,244			25,295,032
Net investment in sales-type leases		5,265,356			5,494,753
Long-term investments - held to maturity		22,257,058			32,581,472
Other non-current assets		288,049			112,300
Total other assets		77,804,017			88,877,524

Total assets	$	239,797,163		$	221,770,365

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable and other current liabilities	$	26,592,399		$	19,368,197
Unearned revenues		9,762,390			9,768,610
Total current liabilities		36,354,789			29,136,807

Non-current liabilities
Deferred tax liabilities		6,760,000			6,760,000
Unearned revenues - long-term		2,656,403			2,562,195

Total liabilities		45,771,192			38,459,002

Commitments and contingencies

Stockholders' equity
Common stock, $.01 par value, authorized 30,000,000 shares; 27,025,441 and 26,933,301 issued at June 30, 2012 and December 31, 2011, respectively		270,254			269,333
Additional paid-in capital		121,330,824			118,134,006
Retained earnings		111,551,819			104,011,848
Accumulated other comprehensive loss		(122,501	)		(99,399	)
Treasury stock at cost, 5,687,631 shares at June 30, 2012 and December 31, 2011		(39,004,425	)		(39,004,425	)
Total stockholders' equity		194,025,971			183,311,363

Total liabilities and stockholders' equity	$	239,797,163		$	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 June 30, 2012										Three Months Ended June 30, 2011
	As Reported							Non-GAAP			As Reported							Non-GAAP
	(unaudited)			Adjustments				(unaudited)			(unaudited)			Adjustments				(unaudited)

Net sales
Products	$	41,443,572		$	-			$	41,443,572		$	30,664,384		$	-			$	30,664,384
Services		7,961,855			-				7,961,855			7,126,422			-				7,126,422
		49,405,427			-				49,405,427			37,790,806			-				37,790,806

Cost of sales
Products		18,650,930			(436,012	)	(a)		18,214,918			14,982,787			(561,094	)	(d)		14,421,693
Services		4,595,285			-				4,595,285			3,072,613			-				3,072,613
		23,246,215			(436,012	)			22,810,203			18,055,400			(561,094	)			17,494,306

Gross profit		26,159,212			436,012				26,595,224			19,735,406			561,094				20,296,500

Operating expenses
Research and development		4,157,088			-				4,157,088			3,725,817			-				3,725,817
Selling, general and administrative		16,209,680			(4,268,545	)	(b)		11,941,135			9,918,643			(938,930	)	(e)		8,979,713
		20,366,768			(4,268,545	)			16,098,223			13,644,460			(938,930	)			12,705,530

Operating income		5,792,444			4,704,557				10,497,001			6,090,946			1,500,024				7,590,970

Other income (expense)
Interest income, net		192,622			-				192,622			216,599			-				216,599
Foreign currency transaction losses, net		(140,218	)		-				(140,218	)		(80,868	)		-				(80,868	)
Other, net		6,630			-				6,630			112,671			-				112,671
		59,034			-				59,034			248,402			-				248,402

Income before income taxes		5,851,478			4,704,557				10,556,035			6,339,348			1,500,024				7,839,372

Income tax expense		2,833,852			719,140		(c)		3,552,992			2,345,699			448,360		(c)		2,794,059

Net income	$	3,017,626		$	3,985,417			$	7,003,043		$	3,993,649		$	1,051,664			$	5,045,313

Earnings per common share
Basic	$	0.14		$	0.19			$	0.33		$	0.19		$	0.05			$	0.24
Diluted	$	0.14		$	0.18			$	0.32		$	0.18		$	0.05			$	0.23

Weighted average number of common shares outstanding
Basic		21,312,471							21,312,471			21,145,458							21,145,458
Diluted		21,834,318							21,834,318			21,789,520							21,789,520

These adjustments reconcile the Company’s GAAP results of operations to its non-GAAP results of operations. The Company believes that presentation of results adjusted for the non-GAAP items described below provides meaningful supplemental information to both management and investors.

(a) Represents amortization expense related to acquired Solidscape, Inc. intangible assets.
(b) Represents non-cash stock-based compensation expense of $632,410, amortization expense of $133,333 related to acquired Solidscape, Inc. intangible assets and expense of $3,502,802 associated with the Company's current efforts to combine with Objet Ltd.
(c) Represents the tax benefit related to non-GAAP adjustments.
(d) Represents the revaluation of Solidscape, Inc. inventory at the time of acquisition.
(e) Represents non-cash stock-based compensation expense of $323,598 and expense of $615,332 for the acquisition of Solidscape, Inc. during the second quarter of 2011.

The Company considers these non-GAAP measures to be indicative of its core operating results and facilitates a comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes, however these measures should not be viewed as a substitute for the Company’s GAAP results.

STRATASYS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP TO GAAP RESULTS OF OPERATIONS


	Six Months Ended June 30, 2012										Six Months Ended June 30, 2011
	As Reported							Non-GAAP			As Reported							Non-GAAP
	(unaudited)			Adjustments				(unaudited)			(unaudited)			Adjustments				(unaudited)

Net sales
Products	$	78,987,247		$	-			$	78,987,247		$	58,760,588		$	-			$	58,760,588
Services		15,382,282			-				15,382,282			13,608,346			-				13,608,346
		94,369,529			-				94,369,529			72,368,934			-				72,368,934

Cost of sales
Products		36,286,970			(872,024	)	(a)		35,414,946			28,468,051			(561,094	)	(d)		27,906,957
Services		8,967,050			-				8,967,050			5,915,025			-				5,915,025
		45,254,020			(872,024	)			44,381,996			34,383,076			(561,094	)			33,821,982

Gross profit		49,115,509			872,024				49,987,533			37,985,858			561,094				38,546,952

Operating expenses
Research and development		8,509,248			-				8,509,248			7,073,910			-				7,073,910
Selling, general and administrative		27,584,472			(5,863,547	)	(b)		21,720,925			18,654,882			(1,262,528	)	(e)		17,392,354
		36,093,720			(5,863,547	)			30,230,173			25,728,792			(1,262,528	)			24,466,264

Operating income		13,021,789			6,735,571				19,757,360			12,257,066			1,823,622				14,080,688

Other income (expense)
Interest income, net		443,048			-				443,048			422,380			-				422,380
Foreign currency transaction losses, net		(192,555	)		-				(192,555	)		(211,983	)		-				(211,983	)
Other, net		102,901			-				102,901			1,509,285			(1,204,408	)	(f)		304,877
		353,394			-				353,394			1,719,682			(1,204,408	)			515,274

Income before income taxes		13,375,183			6,735,571				20,110,754			13,976,748			619,214				14,595,962

Income tax expense		5,835,222			1,136,310		(c)		6,971,532			4,993,604			118,163		(c)		5,111,767

Net income	$	7,539,961		$	5,599,261			$	13,139,222		$	8,983,144		$	501,051			$	9,484,195

Earnings per common share
Basic	$	0.35		$	0.26			$	0.62		$	0.43		$	0.02			$	0.45
Diluted	$	0.35		$	0.26			$	0.60		$	0.41		$	0.02			$	0.44

Weighted average number of common shares outstanding
Basic		21,289,002							21,289,002			21,078,045							21,078,045
Diluted		21,799,629							21,799,629			21,718,985							21,718,985

These adjustments reconcile the Company’s GAAP results of operations to its non-GAAP results of operations. The Company believes that presentation of results adjusted for the non-GAAP items described below provides meaningful supplemental information to both management and investors.

(a) Represents amortization expense related to acquired Solidscape, Inc. intangible assets.
(b) Represents non-cash stock-based compensation expense of $1,113,049, amortization expense of $266,666 related to acquired Solidscape, Inc. intangible assets and expense of $4,483,832 associated with the Company's current efforts to combine with Objet Ltd.
(c) Represents the tax benefit (expense) related to non-GAAP adjustments.
(d) Represents the revaluation of Solidscape, Inc. inventory at the time of acquisition.
(e) Represents non-cash stock-based compensation expense of $647,196 and expense of $615,332 for the acquisition of Solidscape, Inc. during the second quarter of 2011.
(f) Represents gain on sale of an equity investment during the first quarter of 2011.

The Company considers these non-GAAP measures to be indicative of its core operating results and facilitates a comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes, however these measures should not be viewed as a substitute for the Company’s GAAP results.

STRATASYS, INC. AND SUBSIDIARIES

FISCAL YEAR 2012
RECONCILIATION OF NON-GAAP TO GAAP FORWARD LOOKING GUIDANCE

			Earnings Per Diluted Share Range

U.S. GAAP measure			$0.83 to $0.98

Adjustments

Stock-based compensation expense			$0.04 to $0.08
Solidscape, Inc. intangible amortization expense			$ 0.07
Objet-related transaction expense			$0.29 to $0.33

Non-GAAP estimate			$1.31 to $1.38

Forward looking guidance does not reflect the potential combined performance of Stratasys, Inc. and Objet Ltd, nor does it include the estimated costs that would be incurred upon closing the transaction.

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