<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
for the quarterly period ended March 31, 1997
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number 0-20993
DTM CORPORATION
(Exact name of registrant as specified in its charter)
Texas 74-2487065
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1611 Headway Circle, Building 2
Austin, Texas 78754
(Address of principal executive offices)
(Zip code)
512-339-2922
(Registrant's telephone number, including area code)
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 /X/
The number of outstanding shares of common stock was 6,283,082 as of May 2,
1997.
<PAGE>
Part 1. Financial Information
Item 1. Financial Statements
DTM CORPORATION
Condensed Consolidated Statements of Operations (unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1996 1997
-----------------------
<S> <C> <C>
Revenue:
Products $5,329 $7,357
Service and support 461 666
-----------------------
5,790 8,023
Cost of sales:
Products 3,169 4,054
Service and support 300 488
-----------------------
3,469 4,542
-----------------------
Gross profit 2,321 3,481
Operating expenses:
Selling, general and administrative 2,039 2,958
Research and development 951 1,133
-----------------------
2,990 4,091
-----------------------
Operating loss (669) (610)
Interest expense, net (219) (299)
-----------------------
Loss before income tax benefit
allocated from BFGoodrich (888) (909)
Income tax benefit allocated from
BFGoodrich 319 197
-----------------------
Net loss $ (569) $ (712)
=======================
Net loss per share $(0.16) $(0.20)
=======================
Number of shares used 3,609,211 3,609,211
=======================
</TABLE>
See notes to condensed consolidated financial statements
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<PAGE>
DTM CORPORATION
Condensed Consolidated Balance Sheets (unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31, MARCH 31,
1996 1997
------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 329 $ 631
Accounts receivable, net 7,205 6,528
Inventory 4,835 4,757
Prepaid expenses and other 595 501
------------------------
Total current assets 12,964 12,417
Furniture and equipment, net 3,057 2,910
Capitalized software development costs,
net 848 825
Patent and license fees, net 791 939
Other noncurrent assets 237 266
------------------------
Total assets $ 17,897 $ 17,357
========================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 5,845 $ 5,643
Due to BFGoodrich 614 992
Deferred revenues 1,474 1,324
Accrued expenses and other liabilities 2,640 2,645
Short-term borrowings 769 175
------------------------
Total current liabilities 11,342 10,779
Borrowings under line of credit from
BFGoodrich 4,000 4,000
Notes payable 11,040 11,840
Shareholders' equity (deficit):
Preferred stock, $.001 par value,
3,000,000 shares authorized,
no shares issued and outstanding -- --
Common stock, $.0002 par value,
60,000,000 shares authorized;
3,243,391 shared issued and
outstanding 1 1
Additional paid-in capital 28,019 28,019
Accumulated deficit (36,469) (37,181)
Cumulative translation adjustment (36) (101)
------------------------
Total shareholders' equity (deficit) (8,485) (9,262)
------------------------
Total liabilities and shareholders'
equity (deficit) $ 17,897 $ 17,357
========================
</TABLE>
See notes to condensed consolidated financial statements
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<PAGE>
DTM CORPORATION
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1996 1997
---------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (569) $(712)
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Depreciation and amortization 449 607
Changes in assets and liabilities
(used in) provided
by operating activities:
Accounts receivable (1,079) 677
Inventory (1,192) 78
Due to/from BFGoodrich 445 378
Prepaid expenses and other assets (567) 65
Accounts payable 1,417 (202)
Deferred revenues (69) (150)
Accrued expenses and other
liabilities (555) 5
---------------------
Net cash (used in) provided by
operating activities (1,720) 746
INVESTING ACTIVITIES
Purchases of furniture and equipment (582) (273)
Capitalized software development costs (120) (67)
Patent and license expenditures (181) (245)
---------------------
Net cash used in investing activities (883) (585)
FINANCING ACTIVITIES
Proceeds from short-term borrowings 832 371
Repayments of short-term borrowings (370) (965)
Draws on line of credit from BFGoodrich 1,800 --
Proceeds from notes payable -- 800
---------------------
Net cash provided by financing
activities 2,262 206
Effect of foreign exchange rate changes
on cash 20 (65)
---------------------
Net (decrease) increase in cash (321) 302
Cash at beginning of period 756 329
---------------------
Cash at end of period $ 435 $ 631
=====================
</TABLE>
See notes to condensed consolidated financial statements
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<PAGE>
DTM CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of DTM
Corporation ("DTM" or the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997. For further information, refer to the consolidated financial statements
and related footnotes of the Company for the year ended December 31, 1996 as
disclosed in the Prospectus dated May 2, 1997 (the "Prospectus").
2. INVENTORY
Inventory consisted of the following (in thousands):
December 31, March 31,
1996 1997
------------ ---------
Raw materials and purchased parts $3,187 $3,624
Finished goods 1,648 1,133
------ ------
$4,835 $4,757
====== ======
3. SHORT-TERM BORROWINGS
During the three-month period ended March 31, 1997, DTM borrowed $371,000 and
repaid $965,000 under the terms of financing arrangements with a third party. At
March 31, 1997, the Company had a total of $175,000 of short-term borrowings
outstanding, comprised of one loan, bearing an annual interest rate of
approximately 19 percent. The borrowings are collateralized by certain
equipment.
4. LINE OF CREDIT FROM BFGOODRICH
The Company has a line of credit agreement with The B.F.Goodrich Company
("BFGoodrich") under which the Company may borrow up to $4.0 million. As of
March 31, 1997, the amount outstanding under the line of credit was $4.0
million. The line bears interest at the prime commercial lending rate of
Citibank, N.A. (8.5% percent at March 31, 1997). In connection with an initial
public offering in May 1997 (the "IPO"), the Company issued 187,500 shares of
common stock to BFGoodrich to convert $1.5 million of the borrowings to equity.
The remaining $2.5 million was paid in full with proceeds from the IPO.
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<PAGE>
DTM CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
5. NOTES PAYABLE
At March 31,1997, DTM had lines of credit with three banks under unsecured
promissory notes. Total available borrowings from the three banks was $12.2
million and outstanding balances totaled $11.8 million at March 31, 1997.
Subsequent to the IPO, the outstanding balances were retired and the BFGoodrich
comfort letters, given in connection with such lines of credit, were terminated.
Interest paid in connection with all of the above financing arrangements was
approximately $308,000 and $320,000 for the quarters ended March 31, 1996 and
1997, respectively.
6. INCOME TAXES
For periods prior to the IPO, DTM was included in the consolidated federal tax
return of BFGoodrich. Accordingly, for such periods, the Company has recorded
the tax benefit allocated to it by BFGoodrich, which credited the Company with a
tax benefit approximating the benefit that BFGoodrich derived from the use of
the Company's tax losses. For periods subsequent to the IPO, the Company is no
longer entitled to the benefit of the tax allocation agreement between the
Company and BFGoodrich. Refer to the footnotes to the financial statements as of
December 31, 1996 and the disclosures in the Prospectus for additional details.
7. SUPPLEMENTAL EARNINGS PER SHARE
The supplemental earnings per share are computed on a stand alone basis, without
allocation of income tax benefit from BFGoodrich. Both computations reflect the
shares of common stock issuable to employees related to exercisable options (at
exercise prices substantially less than the offering price) that are outstanding
under the Equity Appreciation Plan as of the pricing of the IPO, less shares
presumed to be repurchased using the treasury stock method. The 1997 as adjusted
computation reflects elimination of historically incurred interest expense
related to debt repaid with proceeds from the IPO, along with the number of
shares offered, the net proceeds of which were used to fund debt repayment.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1997
1997 as adjusted
--------- -----------
<S> <C> <C>
Pro forma net loss................................ (909,000) (909,000)
Plus interest on debt repaid with
proceeds from offering...................... -- 296,000
--------- ---------
Pro forma net loss as adjusted.................... (909,000) (613,000)
========= =========
Shares:
Weighted average number of shares
outstanding................................. 3,243,391 3,243,391
Dilutive effect of options to be
issued...................................... 365,820 365,820
Shares issued in the Offering used
to repay outstanding debt................... -- 2,241,029
--------- ---------
Total shares used in computing pro
forma net loss per share.................... 3,609,211 5,850,240
========= =========
Pro forma net loss per share (primary
& fully dilutive)............................... (0.25) (0.10)
========= =========
</TABLE>
8. RECENTLY ISSUED ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings per Share. SFAS No.
128 replaces the presentation of primary earnings per share ("EPS") under
Accounting Principles Board Opinion No. 15 and related Interpretations, with the
presentation of basic EPS (which gives effect only to common shares actually
outstanding) and requires dual presentation of basic and diluted EPS on the face
of the income statement for all entities with complex capital structures. The
Company is required to adopt SFAS No.128 during the fourth quarter of 1997. The
Company has not completed its evaluation of the potential impact of this new
standard on EPS in future periods. However, based on the equity instruments
currently outstanding under existing stock compensation plans, this new standard
is not expected to have a material impact on EPS in future periods.
9. SUBSEQUENT EVENTS
In May 1997, the Company successfully completed the IPO. The net proceeds
received by the Company have been used to repay the Company's bank debt and
other short-term borrowings. The Company intends to use the remaining net
proceeds for general corporate purposes, including the funding of working
capital requirements. Refer to the Prospectus for additional information.
The Company adopted a phantom stock appreciation rights plan whereby all phantom
stock appreciation rights outstanding upon the IPO were converted into
immediately exercisable options to acquire shares of the Company's common stock.
Such conversion resulted in a non-recurring, non-cash, compensation expense of
approximately $2.9 million in the second quarter of 1997. This charge will
result in a substantial reported net loss in the second quarter of 1997. Refer
to the Prospectus for additional information.
-6-
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's Condensed Consolidated Financial Statements and the Notes thereto
included in Item 1 of this Quarterly Report and the Prospectus dated May 2, 1997
(the "Prospectus"). This discussion and analysis contains forward-looking
statements. Such statements are subject to certain risks and uncertainties,
including those discussed below or in the Prospectus, that could cause actual
results to differ materially from the Company's expectations. Readers are
cautioned not to place undue reliance on any forward-looking statements, as they
reflect management's analysis only as of the date hereof. The Company
undertakes no obligation to publicly release results of any revision to these
forward looking statements which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain income
statement data as a percentage of total revenues and certain cost of sales data
as a percentage of respective product revenues and service and support revenues.
QUARTER ENDED MARCH 31,
--------------------------
1996 1997
--------------------------
Revenue:
Products.............................. 92.0 % 91.7 %
Service and support................... 8.0 8.3
--------------------------
Total revenues...................... 100.0 100.0
Cost of sales:
Products.............................. 59.5 55.1
Service and support................... 65.1 73.3
--------------------------
Total cost of sales................. 59.9 56.6
--------------------------
Gross profit............................ 40.1 43.4
Operating expenses:
Selling, general and administrative... 35.2 36.9
Research and development.............. 16.4 14.1
--------------------------
Total operating expenses............ 51.6 51.0
Other income (expense):
Interest expense, net................. (3.8) (3.7)
--------------------------
Loss before income tax benefit allocated
from BFGoodrich (15.3) (11.3)
Income tax benefit allocated from
BFGoodrich............................. 5.5 2.5
--------------------------
Net loss................................ (9.8) (8.8)
==========================
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<PAGE>
Comparison of the Quarters Ended March 31, 1997 and March 31, 1996
The Company's operating results have varied substantially from year to year and
quarter to quarter. A sale by the Company of one of its selective laser
sintering systems ("Systems") can be material to the operating results for any
one quarter. Furthermore, new product introductions, seasonality of customer
buying patterns and other factors can cause fluctuations in operating results.
Revenues. Revenues for the first quarter of 1997 were $8.0 million, an increase
of 37.9 percent, or $2.2 million, compared to revenues of $5.8 million for the
first quarter of 1996. The Company's 1997 first quarter revenues of $8.0 million
resulted from sales of 17 SLS Systems (including one rental conversion), a
majority of which were sold in the second half of the quarter.
Product sales revenue for the first quarter of 1997 was $7.4 million, an
increase of 38.1 percent, or $2.1 million, compared to product sales revenue of
$5.3 million for the first quarter of 1996. The increase was primarily
attributable to greater sales of SLS(R) Systems and powdered materials. Revenues
from powdered materials sales increased as a result of a larger number of
installed SLS Systems.
Service and support revenue for the first quarter of 1997 was $666,000 , an
increase of 44.5 percent, or $205,000, compared to service and support revenue
of $461,000 for the first quarter of 1996. Service and support revenue increased
primarily as a result of the recognition of deferred warranty and maintenance
revenue associated with the larger number of installed SLS Systems.
Gross Profit. As more fully described in the Prospectus, the Company has
historically experienced significant fluctuations in its gross margins. The
Company's gross margins improved for the first quarter of 1997, as the average
SLS System price has increased. Gross profit for the first quarter of 1997 was
$3.5 million, an increase of 50.0 percent, or $1.2 million, compared to gross
profit of $2.3 million for the first quarter of 1996. As a percentage of
revenue, gross profit for the three months ended March 31, 1997, increased to
43.4% from 40.1% for the same period in 1996.
Gross profit attributable to product sales for the first quarter of 1997 was
$3.3 million, an increase of 52.9 percent, or $1.1 million, compared to gross
profit attributable to product sales of $2.2 million for the first quarter of
1996. As a percentage of product sales revenue, gross profit attributable to
product sales increased to 44.9 percent during the period, compared to 40.5
percent for the same period in 1996. The increase in gross profit attributable
to product sales as a percentage of product sales revenue resulted primarily
from an increase in the average SLS System sales price due in part to sales of
the higher priced Sinterstation(R) 2500 System.
Gross profit attributable to service and support revenues for the first quarter
of 1997 was $178,000, an increase of 10.6 percent, or $17,000, compared to gross
profit attributable to service and support revenues of $161,000 for the first
quarter of 1996. As a percentage of service and support revenue, gross profit
attributable to service and support revenues was 26.7 percent and 34.9 percent
for the first quarter of 1997 and 1996, respectively. The decrease in margin
percentage is due to a decrease in training and consulting revenues, as well as
an increase in international maintenance costs.
-8-
<PAGE>
Selling, General and Administrative Expense. Selling, general and administrative
expense includes payroll and fringe benefits, advertising and promotion expenses
and other general expenses. Selling, general and administrative expense for the
first quarter of 1997 was $3.0 million, an increase of 45.1 percent, or $1.0
million, compared to selling, general and administrative expense of $2.0 million
for the first quarter of 1996. A larger workforce in the first quarter of 1997
resulted in compensation and fringe benefits increasing more than $302,000 over
1996 costs. Agent commissions increased by approximately $301,000 over 1996
costs due to increased activity internationally. Selling, general and
administrative expense in the first quarter of 1997 was impacted by an increase
in travel, office and development costs of approximately $285,000. As a
percentage of revenue, selling, general and administrative expense increased to
36.9 percent in the first quarter of 1997 from 35.2 percent in the first quarter
of 1996.
Research and Development Expense. Research and development expense for the first
quarter of 1997 was $1.1 million, an increase of 19.1 percent, or $182,000,
compared to research and development expense of $951,000 for the first quarter
of 1996. As a percentage of revenue, research and development expense decreased
to 14.1 percent for the first quarter of 1997 from 16.4 percent for the first
quarter of 1996, primarily due to the increase in revenues. The increase in
research and development expense for the first quarter of 1997 as compared to
research and development expense for the first quarter of 1996 was due to the
continuing improvement of the selective laser sintering process and the ongoing
development of new powdered materials to be used in the selective laser
sintering process.
Interest Expense. Net interest expense for the first quarter of 1997 was
$299,000, an increase of $80,000 compared to interest expense of $219,000 for
the first quarter of 1996. This reflects an increase in the average daily
balance of the Company's outstanding indebtedness and an increase in the average
interest rates on such debt.
Income Taxes. As a result of its tax sharing arrangement with BFGoodrich, the
Company was allocated an income tax benefit of $197,000 in the first quarter of
1997 compared to $319,000 in the first quarter of 1996. Due to a change in
BFGoodrich ownership percentage resulting from the IPO, for periods following
the IPO, the Company will no longer have the benefit from the tax allocation
agreement between the Company and BFGoodrich. Refer to the footnotes to the
financial statements as of December 31, 1996 and the disclosures in the
Prospectus for additional details regarding income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, cash used by the Company for operations and investing
activities has exceeded cash generated by the Company. The Company generally has
financed its cash needs through transactions with BFGoodrich and borrowings from
commercial banks and other short-term sources.
Net cash (used in) provided by operating activities was approximately ($1.7)
million and $746,000 in the first quarter of 1996 and 1997, respectively. Net
cash provided by operating activities of $746,000 for the first quarter of 1997
resulted from the net loss for the quarter of $712,000 adjusted for depreciation
and amortization of $607,000. In addition, decreases in accounts receivable of
$677,000 and increases in amounts due to/from BFGoodrich of $378,000 were offset
by a decrease to accounts payable of $202,000 and an increase in deferred
revenue of $150,000. For the quarters ended March 31, 1996 and 1997, BFGoodrich
allocated to the Company approximately $319,000 and $197,000, respectively, for
tax benefits resulting from inclusion of the Company in the consolidated income
tax return of BFGoodrich. Such amounts are included in "Due to/from BFGoodrich"
in changes in assets and liabilities used in operating activities in the
Condensed Statements of Cash Flows. See Note 6 to the Condensed Consolidated
Financial Statements for additional information.
-9-
<PAGE>
The Company's investing activities included expenditures for patents and
licenses, capitalized software costs and furniture and equipment. Net cash used
by investing activities was approximately $883,000 and $585,000 in the first
quarter of 1996 and 1997, respectively.
The existence of the tax benefit allocation from BFGoodrich reduced the
Company's losses for all periods from 1994 through March 31, 1997. The Company
expects that the loss of the tax benefit allocation will materially adversely
affect its financial results and cash flows in any period in which the Company
generates a loss. The benefits of utilizing future tax loss carryforwards would
be realized, however, should sufficient profits be generated prior to the
expiration of any tax loss carryforwards.
Total indebtedness of the Company was approximately $16.0 million as of
March 31, 1997, consisting primarily of notes payable to commercial banks under
existing lines of credit, short-term borrowings from other financing sources and
a line of credit extended to the Company by BFGoodrich under which the Company
had $4.0 million in outstanding borrowings. The Company retired approximately
$15.8 million of the debt with proceeds from the IPO. In the past, BFGoodrich
assisted the Company in obtaining loans from commercial banks by providing
comfort letters to lenders. The Company has been advised by BFGoodrich that with
the completion of the IPO it does not intend to continue to finance, or arrange
for the financing of, the operations of the Company.
The Company obtained a loan commitment letter from Texas Commerce Bank for a
revolving line of credit ("line of credit") which is subject to negotiation and
execution of mutually acceptable definitive documentation. Assuming a line of
credit is established with the terms set forth in the commitment letter, the
Company's ability to borrow thereunder will be subject to a borrowing base
calculation and the Company meeting certain financial thresholds, including
attaining certain levels of "established profitability," as defined therein.
Until achieving one such level, the Company would be permitted to borrow up to
$3.0 million; thereafter, available advances against eligible receivables would
be increased up to a maximum of $6.0 million. Loans under the line of credit
would mature within one year, would be collateralized by the Company's accounts
receivable and inventory and would bear interest at the bank's prime interest
rate plus three quarters of one percent. The commitment provides that the
Company would be bound by customary covenants, including restrictions on
additional liens or borrowings, as well as the payment of dividends, and
affirmative reporting requirements. In addition, the terms of the commitment
letter specify that the bank would have the option to terminate the obligation
to make further advances under the line of credit on 30 days notice if
employment of the chief executive officer of the Company terminates and a
qualified successor is not appointed by the Company and approved by Texas
Commerce Bank within a specified period of time.
-10-
<PAGE>
OTHER FACTORS AFFECTING FUTURE OPERATIONS
Seasonality. The Company's revenues are affected by capital budgeting and
spending patterns in world wide market and shortened selling periods in certain
international markets. Due to these seasonal factors, the Company typically
experiences slowdowns in sales of SLS Systems during the first quarter as a
result of capital spending patterns in the North American market and during the
third quarter as a result of shortened selling periods in certain international
markets.
Foreign Operations. The Company competes on an international basis through its
wholly owned subsidiary located in Germany and through export sales derived from
its United States sales operations (principally to the Pacific Rim). Sales to
customers outside of the United States constitute a significant portion of DTM's
revenues. International sales are generally priced in U.S. dollars. However,
European sales prices are sometimes negotiated in either Deutschmarks or the
local currency. The Company does not engage in hedging to mitigate the effects
of foreign currency exchange rate risk and has not experienced any significant
impact therefrom.
Equity Appreciation Plan. The Company adopted a phantom stock appreciation
rights plan whereby all phantom stock appreciation rights outstanding upon the
IPO were converted into immediately exercisable options to acquire shares of the
Company's common stock. Such conversion resulted in a non-recurring, non-cash,
compensation expense of approximately $2.9 million in the second quarter of
1997. This charge will result in a substantial reported net loss in the second
quarter of 1997. Refer to the Prospectus for additional information.
Intellectual Property and Proprietary Rights. In pursuing protection for its
proprietary rights in its SLS Systems, materials and related technology, the
Company currently relies on a combination of patent, copyright, trademark and
trade secret rights, as well as contractual provisions. The Company typically
seeks patent protection for its selective laser sintering technology, including,
where deemed appropriate, the selective laser sintering process, the SLS Systems
and the materials used in the SLS Systems. However, patent protection may not
always be available. There can be no assurance that patents will be issued
under any or all of the patent applications to which the Company has rights. In
addition, the laws of various countries in which the Company's products may be
sold may not protect the Company's products and intellectual property rights to
the same extent as the laws of the United States. Refer to the Prospectus for
additional details regarding intellectual property and litigation.
Quarterly Fluctuations in Operating Results. The Company's revenues and
operating results have varied substantially from quarter to quarter and may
continue to do so. The Company's revenues are earned unevenly throughout the
quarter and are typically skewed to the later end of the quarter. DTM typically
experiences a relatively long lead time to complete an SLS System sale and has
historically experienced little or no backlog. Furthermore, new product
introductions, seasonality of customer buying patterns and other factors can
cause fluctuations in quarterly results. The failure of the Company to complete
a particular SLS System sale in any given quarter can have a material adverse
effect on the Company's business and financial performance for that quarter.
Dependence on Third-Party Suppliers. The Company subcontracts for manufacture of
SLS System components, powdered sintering materials and accessories from single-
source, third-party suppliers. A disruption in supply or failure of a supplier
to remain competitive in functionality or price could have a material adverse
effect on the Company's sales or reputation for timely delivery, and, hence, on
the Company's business and financial performance.
-11-
<PAGE>
New Products; Engineering Testing Delays. The Company's ability to achieve and
maintain a significant market share may depend heavily on its ability to improve
its existing products, as well as to introduce new and innovative products that
facilitate increased use and more specialized applications of existing products.
DTM cannot predict with any certainty the degree to which its ongoing research
and development efforts in the areas of SLS System and materials enhancements
will be successful or, if so, when. In addition, the Company can provide no
assurance of its future success in selecting, developing, manufacturing and
marketing new products. When the Company or its competitors announce new
products with capabilities or technologies that have the potential to replace
the Company's existing product offerings, customers may defer or forego
purchases of existing Company products. This could materially adversely affect
the Company's business and financial performance. While the Company performs
extensive testing prior to releasing new product designs or product
enhancements, products may contain unforeseen errors or performance problems.
The correction of errors and problems in new products could cause delays in
product introductions or shipments, require design modifications to previously
shipped products or cause adverse publicity, any of which could adversely affect
the Company's business and financial performance.
Competition. The market for rapid prototyping systems is highly competitive.
In marketing its SLS Systems, the Company experiences competition from many
sources. Certain of the Company's competitors may be better known and may have
greater financial, research and development, production and marketing resources
than DTM. Competition could increase as a result of the introduction of new
products or product enhancements by these competitors or the entry into the
industry by other companies. Increased competition could result in price
reductions, reduced margins and loss of market share, all of which could
materially adversely affect the Company's business and financial results.
SAFE HARBOR STATEMENT
Investors are cautioned that forward-looking statements contained in this 10-Q
involve risks and uncertainties including without limitation the matters
described in "Other factors affecting future operations" and the following: (i)
the Company's plans, strategies, objectives, expectations and intentions are
subject to change at any time at the discretion of management and the Board of
Directors; (ii) the Company's plans and results of operations will be affected
by the Company's ability to manage its growth and working capital; and (iii) the
Company's business is highly competitive and the entrance of new competitors or
the expansion of the operations by existing competitors in the Company's markets
could adversely affect the Company's plans and results of operations.
-12-
<PAGE>
Part 2. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's shareholders effected a series of recapitalizations completed in
April 1997 that resulted in an effective 1.022-for-1 stock split. The last two
steps of such recapitalizations occurred in February and March of 1997, as
described below:
On February 18, 1997, a special telephonic meeting of the shareholders of
the Company was held. At that meeting, the shareholders adopted an amendment to
the Company's articles of incorporation that reflected a recapitalization of the
Company's common stock, pursuant to which each outstanding share of common
stock, $.0003 par value per share, of the Company would be converted into .625
shares of common stock, $.0002 par value per share, of the Company in
preparation for a possible initial public offering of common stock. 6,930,004
shares of common stock were voted for the amendment and no shares of common
stock were voted against the amendment. All shares of common stock were voted in
connection with such amendment. This amendment was not filed with the Texas
Secretary of State, and was superseded by the amendment that was approved in an
action in writing effective March 31, 1997.
As of March 31, 1997, by written consent the Company's shareholders
adopted an amendment to the Company's articles of incorporation that reflected a
recapitalization of the Company's common stock, pursuant to which each
outstanding share of common stock, $.0003 par value per share, of the Company
was converted into .468022 shares of common stock, $.0002 par value per share,
of the Company in preparation for a possible initial public offering of common
stock. 6,930,004 shares of common stock were voted for the amendment and no
shares of common stock were voted against the amendment. All shares of common
stock were voted in connection with such amendment.
In addition, the shareholders took the following action at their annual
meeting:
The annual meeting of the Company's shareholders was held on March 18,
1997. At that time, all of the directors of the Company were reelected and the
selection of Ernst & Young LLP as the independent auditors for 1997 was
approved. The directors reelected included Alexander MacLachlan, Marshall O.
Larsen, John S. Murchison III, Thomas G. Ricks, Steven G. Rolls and D. Lee
Tobler. 6,388,875 shares of common stock were voted for each of the persons
named and no shares of common stock were voted against any of the persons named.
541,127 shares were not represented and were not voted at this meeting.
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 1997.
Exhibit 11 - Statement of Re-computation of per share earnings is filed as part
of this report.
Exhibit 27 - Financial Data Schedule
-13-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: June 5, 1997
DTM CORPORATION
(Registrant)
/S/ John S. Murchison, III
---------------------------
John S. Murchison, III
President and Chief Executive Officer
/S/ Uday Bellary
-----------------
Uday Bellary
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
-14-
<PAGE>
EXHIBIT 11.1
STATEMENT OF COMPUTATION OF EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1996 1997
--------- -----------
<S> <C> <C>
Net loss.......................................... (569,000) (712,000)
========= =========
Shares:
Weighted average number of shares
outstanding................................. 3,243,391 3,243,391
Dilutive effect of options to be
issued(1)................................... 365,820 365,820
--------- -----------
Total shares used in computing pro
forma net loss per share.................... 3,609,211 3,609,211
========= =========
Net loss per share (primary
& fully dilutive)............................... (0.16) (0.20)
========= =========
</TABLE>
- ------------
(1) Reflects the shares of Common Stock issuable to employees related to
exercisable options (at exercise prices substantially less than the
offering price) that are outstanding under the Equity Appreciation Plan as
of the pricing of the IPO, less shares assumed to be repurchased using the
treasury stock method.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEET AND THE CONDENSED CONSOLIDATED STATEMENT OF INCOME OF
THIS FORM 10-Q AND IS QUALIFED IN ITS ENTIRETY BY RFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> MAR-31-1996 MAR-31-1997
<CASH> 329 631
<SECURITIES> 0 0
<RECEIVABLES> 7,845 7,168
<ALLOWANCES> 640 640
<INVENTORY> 4,835 4,757
<CURRENT-ASSETS> 12,964 12,417
<PP&E> 9,159 9,175
<DEPRECIATION> 6,102 6,265
<TOTAL-ASSETS> 17,897 17,357
<CURRENT-LIABILITIES> 11,342 10,779
<BONDS> 0 0
0 0
0 0
<COMMON> 1 1
<OTHER-SE> 28,019 28,019
<TOTAL-LIABILITY-AND-EQUITY> 17,897 17,357
<SALES> 5,329 7,357
<TOTAL-REVENUES> 5,790 8,023
<CGS> 3,169 4,054
<TOTAL-COSTS> 3,469 4,542
<OTHER-EXPENSES> 2,990 4,091
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 219 299
<INCOME-PRETAX> (888) (909)
<INCOME-TAX> (319) (197)
<INCOME-CONTINUING> (569) (712)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (569) (712)
<EPS-PRIMARY> 0 (0.25)
<EPS-DILUTED> 0 (0.10)
</TABLE>
