Stratasys Reports Third Quarter Financial Results

The company will hold a conference call to discuss its third quarter financial results on Thursday, October 29, 2009 at 8:30 a.m. (ET). The investor conference call will be available via live webcast on the Stratasys Web site at www.stratasys.com under the "Investors" tab. To participate by telephone, the domestic dial-in number is 866-783-2143, and the international dial-in is 857-350-1602. The access code is 36423313. Investors are advised to dial into the call at least ten minutes prior to the call to register.

The webcast will be available for 90 days on the "Investors" page of the Stratasys website.

(Financial tables follow)

Stratasys, Inc., Minneapolis, manufactures additive fabrication machines for prototyping and manufacturing plastic parts. The company also operates a service for part prototyping and production. According to Wohlers Report 2009, Stratasys supplied 43 percent of all additive fabrication systems installed worldwide in 2008, making it the unit market leader for the seventh consecutive year. Stratasys patented and owns the process known as FDM.^® The process creates functional prototypes and end-use parts directly from any 3D CAD program, using high-performance industrial thermoplastics. The company holds more than 250 granted or pending additive fabrication 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.

Forward Looking Statements

All statements herein that are not historical facts or that include such words as “expects,” “anticipates,” “projects,” “estimates,” “vision,” “planning” or “believes” or similar words constitute forward-looking statements covered by the safe harbor protection of the Private Securities Litigation Reform Act of 1995. Except for the historical information herein, the matters discussed in this news release are forward-looking statements that involve risks and uncertainties. These include statements regarding projected revenue and income in future quarters; the size of the 3D printing market; our objectives for the marketing and sale of our Dimension^® 3D Printers and our Fortus^TM 3D Production Systems, particularly for use in direct digital manufacturing (DDM); the demand for our proprietary consumables; the expansion of our paid parts service; and our beliefs with respect to the growth in the demand for our products. Other risks and uncertainties that may affect our business include our ability to penetrate the 3D printing market; our ability to achieve the growth rates experienced in preceding quarters; our ability to introduce, produce and market new materials, such as ABSplus and ABS-M30, and the market acceptance of these and other materials; the impact of competitive products and pricing; our timely development of new products and materials and market acceptance of those products and materials; the success of our recent R&D initiative to expand the DDM capabilities of our core FDM technology; and the success of our RedEyeOnDemand^TM and other paid parts services. Actual results may differ from those expressed or implied in our forward-looking statements. These statements represent beliefs and expectations only as of the date they were made. We may elect to update forward-looking statements, but we expressly disclaim any obligation to do so, even if our beliefs and expectations change. In addition to the statements described above, such forward-looking statements are subject to the risks and uncertainties described more fully in our reports filed or to be filed with the Securities and Exchange Commission, including our annual reports on Form 10-K and quarterly reports on Form 10-Q.

Financial Tables & Non-GAAP Discussion

The information discussed within this release includes financial results that are in accordance with accounting principles generally accepted in the United States (GAAP). Certain prior year balance sheet amounts shown in the financial tables have been reclassified to conform to the current year’s presentation. In addition, certain non-GAAP financial measures have been provided that exclude certain charges and expenses. 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 an impairment charge for certain auction rate securities, restructuring expenses, and expenses associated with stock-based compensation required under SFAS 123R. The company uses these non-GAAP financial measures for evaluating comparable financial performance against prior periods.

This release is also available on the Stratasys Web site at www.Stratasys.com.

STRATASYS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(unaudited)			(unaudited)			(unaudited)			(unaudited)

Net sales
Product	$	18,046,184		$	23,965,510		$	53,197,716		$	73,919,081
Services		6,283,212			6,603,918			18,924,759			18,632,957
		24,329,396			30,569,428			72,122,475			92,552,038


Cost of goods sold
Product		9,918,263			12,048,155			30,883,158			34,512,079
Services		2,542,879			2,706,835			8,225,489			7,553,275
		12,461,142			14,754,990			39,108,647			42,065,354

Gross profit		11,868,254			15,814,438			33,013,828			50,486,684

Operating expenses
Research and development		1,983,420			2,100,349			5,510,385			6,841,822
Selling, general and administrative		7,481,311			8,415,988			25,257,138			27,004,811
		9,464,731			10,516,337			30,767,523			33,846,633

Operating income		2,403,523			5,298,101			2,246,305			16,640,051

Other income (expense)
Interest income, net		230,429			498,831			754,695			1,646,730
Foreign currency transaction losses, net		(5,930	)		(83,794	)		(169,148	)		(299,620	)
Other		(9,021	)		(33,560	)		16,780			(286,592	)
		215,478			381,477			602,327			1,060,518

Income before income taxes		2,619,001			5,679,578			2,848,632			17,700,569

Income taxes		1,040,201			1,970,011			1,124,191			6,096,378

Net income	$	1,578,800		$	3,709,567		$	1,724,441		$	11,604,191

Earnings per common share
Basic	$	0.08		$	0.18		$	0.09		$	0.56
Diluted	$	0.08		$	0.18		$	0.09		$	0.54

Weighted average number of common shares outstanding
Basic		20,229,357			20,616,338			20,224,889			20,829,338
Diluted		20,231,033			21,021,417			20,233,234			21,354,073

STRATASYS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	September 30,			December 31,
	2009			2008
	(unaudited)

ASSETS

Current assets
Cash and cash equivalents	$	34,993,140		$	27,945,799
Short-term investments - held to maturity		12,207,926			4,835,055
Accounts receivable, less allowance for doubtful accounts of $1,099,442 and $1,017,521 in 2009 and 2008, respectively		20,887,758			26,539,733
Inventories		15,388,102			19,889,351
Net investment in sales-type leases, less allowance for doubtful accounts of $199,709 and $324,642 in 2009 and 2008, respectively		4,064,467			3,870,472
Prepaid expenses and other current assets		2,702,167			2,608,080
Deferred income taxes		2,168,000			2,168,000
Total current assets		92,411,560			87,856,490

Property and equipment, net		26,871,099			29,749,921

Other assets
Intangible assets, net		7,886,767			8,347,200
Net investment in sales-type leases		3,560,840			4,545,977
Long-term investments - available for sale securities		1,109,250			1,109,250
Long-term investments - held to maturity		11,363,730			13,825,981
Other non-current assets		1,613,154			2,308,214
Total other assets		25,533,741			30,136,622

Total assets	$	144,816,400		$	147,743,033

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable and other current liabilities	$	8,379,196		$	11,795,238
Unearned revenues		10,242,116			12,765,396
Total current liabilities		18,621,312			24,560,634

Non-current liabilities
Deferred tax liabilities		620,000			620,000
Total non-current liabilities		620,000			620,000

Total liabilities		19,241,312			25,180,634

Commitments and contingencies

Stockholders' equity
Common stock, $.01 par value, authorized 30,000,000 shares, issued 25,925,503 shares as of September 30, 2009 and 25,909,603 shares as of December 31, 2008		259,255			259,096
Capital in excess of par value		92,719,350			91,611,078
Retained earnings		71,624,111			69,899,669
Accumulated other comprehensive loss		(23,203	)		(203,019	)
Less cost of treasury stock, 5,687,631 shares in 2009 and 2008		(39,004,425	)		(39,004,425	)
Total stockholders' equity		125,575,088			122,562,399

Total liabilities and stockholders' equity	$	144,816,400		$	147,743,033

STRATASYS, INC.

RECONCILIATION OF NON-GAAP TO GAAP RESULTS OF OPERATIONS


	Non-GAAP Adjustments for the Three Months Ended September 30, 2009											Non-GAAP Adjustments for the Three Months Ended September 30, 2008
	Consolidated (unaudited) As Reported			Stock-Based Compensation (1)			Consolidated (unaudited) Non-GAAP					Consolidated (unaudited) As Reported			Stock-Based Compensation (1)			Auction Rate Security (3)		Consolidated (unaudited) Non-GAAP




Selling, general and administrative expenses	$	7,481,311		$	(238,032	)	$	7,243,279				$	8,415,988		$	(321,285	)	$	-	$	8,094,703

Total operating expenses		9,464,731			(238,032	)		9,226,699					10,516,337			(321,285	)		-		10,195,052

Operating income		2,403,523			238,032			2,641,555					5,298,101			321,285			-		5,619,386

Other income (loss)		(9,021	)		-			(9,021	)				(33,560	)		-			50,000		16,440
Total other income		215,478			-			215,478					381,477			-			50,000		431,477

Income before income taxes		2,619,001			238,032			2,857,033					5,679,578			321,285			50,000		6,050,863
Income taxes		1,040,201			28,000			1,068,201					1,970,011			83,000			19,000		2,072,011

Net income	$	1,578,800		$	210,032		$	1,788,832				$	3,709,567		$	238,285		$	31,000	$	3,978,852

Earnings per common share
Basic	$	0.08		$	0.01		$	0.09				$	0.18		$	0.01		$	0.00	$	0.19
Diluted	$	0.08		$	0.01		$	0.09				$	0.18		$	0.01		$	0.00	$	0.19

Weighted average number of common shares outstanding
Basic		20,229,357						20,229,357					20,616,338								20,616,338
Diluted		20,231,033						20,231,033					21,021,417								21,021,417




	Non-GAAP Adjustments for the Nine Months Ended September 30, 2009											Non-GAAP Adjustments for the Nine Months Ended September 30, 2008
	Consolidated (unaudited) As Reported			Stock-Based Compensation (1)			Restructuring (2)			Consolidated (unaudited) Non-GAAP		Consolidated (unaudited) As Reported			Stock-Based Compensation (1)			Auction Rate Security (3)		Consolidated (unaudited) Non-GAAP


Selling, general and administrative expenses	$	25,257,138		$	(670,959	)	$	(778,840	)	$	23,807,339	$	27,004,811		$	(956,503	)	$	-	$	26,048,308

Total operating expenses		30,767,523			(670,959	)		(778,840	)		29,317,724		33,846,633			(956,503	)		-		32,890,130

Operating income		2,246,305			670,959			778,840			3,696,104		16,640,051			956,503			-		17,596,554

Other income (loss)		16,780			-			-			16,780		(286,592	)		-			440,000		153,408
Total other income		602,327			-			-			602,327		1,060,518			-			440,000		1,500,518

Income before income taxes		2,848,632			670,959			778,840			4,298,431		17,700,569			956,503			440,000		19,097,072
Income taxes		1,124,191			102,000			266,907			1,493,098		6,096,378			189,218			152,000		6,437,596

Net income	$	1,724,441		$	568,959		$	511,933		$	2,805,333	$	11,604,191		$	767,285		$	288,000	$	12,659,476

Earnings per common share
Basic	$	0.09		$	0.03		$	0.03		$	0.14	$	0.56		$	0.04		$	0.01	$	0.61
Diluted	$	0.09		$	0.03		$	0.03		$	0.14	$	0.54		$	0.04		$	0.01	$	0.59

Weighted average number of common shares outstanding
Basic		20,224,889									20,224,889		20,829,338								20,829,338
Diluted		20,233,234									20,233,234		21,354,073								21,354,073

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.

(1) - Represents non-cash stock-based compensation expense.
(2) - Represents severance and other related costs associated with the Company's restructuring in the first quarter of 2009.
(3) - Represents a reduction in the assessed fair value of an auction rate security investment that the Company considered to be other than temporary.

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.

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