<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-22250
3D SYSTEMS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 95-4431352
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
26081 AVENUE HALL, VALENCIA, CALIFORNIA 91355
-----------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(661) 295-5600
-----------------------------------------------------
(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 report(s), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
------ ------
Shares of Common Stock, par value $0.001, outstanding as of May 5,
2000: 11,898,755
Page 1 of 17
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3D SYSTEMS CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I.FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 2000 and December 31, 1999 ......................................3
Consolidated Statements of Operations
For the Three Month Periods Ended
March 31, 2000 and April 2, 1999 ..................................... 4
Consolidated Statements of Cash Flows
For the Three Month Periods Ended
March 31, 2000 and April 2, 1999 ..................................... 5
Consolidated Statements of Comprehensive Income
For the Three Month Periods Ended
March 31, 2000 and April 2, 1999 ......................................6
Notes to Consolidated Financial Statements ..................................... 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................................10
ITEM 3. Quantitative and Qualitative Disclosures
About Market Risk ......................................15
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K ......................................16
</TABLE>
Page 2 of 17
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3D SYSTEMS CORPORATION
Consolidated Balance Sheets
As of March 31, 2000 and December 31, 1999
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
ASSETS March 31, 2000 December 31, 1999
------------------ ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,308 $ 12,553
Accounts receivable, less allowances for
doubtful accounts of $2,841 (2000) and $2,912 (1999) 26,116 26,772
Current portion of lease receivables 944 607
Inventories 11,804 8,786
Deferred tax assets 2,355 2,355
Prepaid expenses and other current assets 1,866 2,028
------------------ ------------------
Total current assets $ 54,393 $ 53,101
Property and equipment, net 15,270 16,245
Licenses and patent costs, net 9,010 9,135
Deferred tax assets 7,381 7,658
Lease receivables, less current portion 2,606 2,436
Other assets 2,344 2,083
------------------ ------------------
$ 91,004 $ 90,658
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,847 $ 5,838
Accrued liabilities 7,964 8,741
Current portion of long-term debt 115 110
Customer deposits 420 345
Deferred revenues 8,039 6,848
------------------ ------------------
Total current liabilities 22,385 21,882
Other liabilities 3,693 4,673
Long-term debt, less current portion 4,435 4,495
------------------ ------------------
30,513 31,050
------------------ ------------------
Stockholders' equity:
Preferred stock, $.001 par value. Authorized 5,000
shares; none issued - -
Common stock, $.001 par value. Authorized 25,000
shares; issued 11,899 and outstanding 11,674 (2000)
and issued 11,658 and outstanding 11,433 (1999) 12 12
Capital in excess of par value 76,286 75,064
Notes receivable from officers (240) (240)
Accumulated deficit (10,986) (12,066)
Accumulated other comprehensive loss (3,041) (1,622)
Treasury stock, at cost, 225 shares (2000 and 1999) (1,540) (1,540)
------------------ ------------------
Total stockholders' equity 60,491 59,608
------------------ ------------------
$ 91,004 $ 90,658
================== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3 of 17
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3D SYSTEMS CORPORATION
Consolidated Statements of Operations
Three Month Periods Ended March 31, 2000 and April 2, 1999
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
For the Three Month Periods Ended
--------------------------------------
March 31, 2000 April 2, 1999
------------------ ------------------
<S> <C> <C>
Sales:
Products $ 15,672 $ 15,278
Services 7,340 7,406
------------------ ------------------
Total sales 23,012 22,684
------------------ ------------------
Cost of sales:
Products 6,951 8,535
Services 5,263 4,955
------------------ ------------------
Total cost of sales 12,214 13,490
------------------ ------------------
Gross profit 10,798 9,194
Operating expenses:
Selling, general and administrative 7,333 10,230
Research and development 1,871 2,443
------------------ ------------------
Total operating expenses 9,204 12,673
------------------ ------------------
Income (loss) from operations 1,594 (3,479)
Interest income 132 177
Interest and other expense (90) (51)
------------------ ------------------
Income (loss) before provision for income taxes 1,636 (3,353)
Provision for income taxes (benefit) 556 (1,073)
------------------ ------------------
Net income (loss) $ 1,080 $ (2,280)
================== ==================
Shares used to calculate basic net income
(loss) per share 11,551 11,390
================== ==================
Basic net income (loss) per share $ 0.09 $ (0.20)
================== ==================
Shares used to calculate diluted net income
(loss) per share 12,340 11,390
================== ==================
Diluted net income (loss) per share $ 0.09 $ (0.20)
================== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4 of 17
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3D SYSTEMS CORPORATION
Consolidated Statements of Cash Flows
Three Month Periods Ended March 31, 2000 and April 2, 1999
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
2000 1999
----------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 1,080 $ (2,280)
Adjustments to reconcile net income (loss) to net cash
used for operating activities:
Deferred income taxes 277 ---
Depreciation and amortization 1,757 1,338
Provision for accounts receivable (26) 281
Increase (decrease) in cash resulting from changes in:
Accounts receivable 80 (1,720)
Lease receivables (507) 525
Inventories (3,536) (1,257)
Prepaid expenses and other current assets 162 (722)
Other assets (406) (1,357)
Accounts payable 83 340
Accrued liabilities (777) (1,379)
Customer deposits 75 354
Deferred revenues 1,191 (383)
Other liabilities (980) 495
----------------- ----------------
Net cash used for operating activities (1,527) (5,765)
INVESTING ACTIVITIES:
Purchase of property and equipment (1,128) (1,426)
Disposition of property and equipment 734 849
License and patent costs (118) (88)
Proceeds from short-term investments --- (498)
----------------- ----------------
Net cash used for investing activities (512) (1,163)
FINANCING ACTIVITIES:
Exercise of stock options 1,222 83
Repayments of note payable (55) (50)
----------------- ----------------
Net cash provided by financing activities 1,167 33
Effect of exchange rate changes on cash (373) 559
----------------- ----------------
Net decrease in cash and cash equivalents (1,245) (6,336)
Cash and cash equivalents at the beginning of the period 12,553 15,912
----------------- ----------------
Cash and cash equivalents at the end of the period $ 11,308 $ 9,576
================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5 of 17
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3D SYSTEMS CORPORATION
Consolidated Statements of Comprehensive Income
Three Month Periods Ended March 31, 2000 and April 2, 1999
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
2000 1999
----------------- ----------------
<S> <C> <C>
Net income (loss) $ 1,080 $ (2,280)
Foreign currency translation (1,419) (1,228)
----------------- ----------------
Comprehensive loss $ (339) $ (3,508)
================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 6 of 17
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3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements
March 31, 2000 and December 31, 1999
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements of 3D Systems
Corporation and subsidiaries (the "Company") are prepared in accordance
with instructions to Form 10-Q and, in the opinion of management, include
all material adjustments (consisting only of normal recurring accruals)
which are necessary for the fair presentation of results for the interim
periods. The Company reports its interim financial information on a 13-week
basis ending the last Friday of each quarter, and reports its annual
financial information through the calendar year ended December 31. These
unaudited consolidated financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1999. The results of the three month period ended March 31, 2000 are not
necessarily indicative of the results to be expected for the full year.
(2) Significant Accounting Policies
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" (SAB 101), which provides additional guidance in applying
generally accepted accounting principles to revenue recognition in the
financial statements. We have evaluated the provisions of SAB 101 and
believe its impact on our revenue recognition policy is immaterial.
(3) Inventories (in thousands):
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
----------------- -----------------
<S> <C> <C>
Raw materials $ 1,256 $ 1,633
Work in progress 650 778
Finished goods 9,898 6,375
----------------- -----------------
$ 11,804 $ 8,786
================= =================
</TABLE>
(4) Property and Equipment (in thousands):
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
----------------- -----------------
<S> <C> <C>
Land and building $ 4,637 $ 4,637
Machinery and equipment 19,431 20,420
Office furniture and equipment 3,135 3,083
Leasehold improvements 2,822 2,836
Rental equipment 984 1,014
Construction in progress 99 97
----------------- -----------------
31,108 32,087
Less accumulated depreciation (15,838) (15,842)
----------------- -----------------
$ 15,270 $ 16,245
================= =================
</TABLE>
Page 7 of 17
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3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements
March 31, 2000 and December 31, 1999
(Unaudited)
(5) Interest income and interest and other expense
This primarily consists of interest income, interest expense and other
expenses related to investment and leasing activities.
(6) Employee Stock Purchase Plan
In May 1998, the Company established the 1998 Employee Stock Purchase Plan
to provide eligible employees the opportunity to acquire limited amounts of
the Company's common stock. Under the plan, participants will receive
options to purchase shares, which are exercisable no later than one year
from the date of grant. The exercise price of each option will be the
lesser of (I) 85% of the fair market value of the shares on the date the
option is granted or (II) 85% of the fair market value of shares on the
last day of the period during which the option is outstanding. An aggregate
of 600,000 shares of common stock have been reserved for issuance under the
plan. As of March 31, 2000, 101,237 shares have been purchased through this
plan.
(7) Computation of Earnings Per Share
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share", basic net income (loss) per share is computed by
dividing net income (loss) by the weighted average number of shares of
common stock outstanding during the period. Dilutive net income (loss)
per share is computed by dividing net income (loss) by the weighted
average number of shares of common stock outstanding plus the number
of additional common shares that would have been outstanding if all
dilutive potential common shares had been issued. Potential common shares
related to stock options and stock warrants are excluded from the
computation when their effect is antidilutive.
The following is a reconciliation of the numerator and denominator of the
basic and diluted earnings per share (EPS) computations for the three month
periods ended March 31, 2000 and April 2, 1999 (in thousands):
<TABLE>
<CAPTION>
2000 1999
----------------- -----------------
<S> <C> <C>
Numerator:
Net income (loss): numerator for basic net income (loss)
per share and dilutive net income (loss) per share $ 1,080 $ (2,280)
================= =================
Denominator:
Denominator for basic net income (loss) per
share-weighted average shares 11,551 11,390
Effect of dilutive securities:
Stock options and warrants 789 ---
----------------- -----------------
Denominator for dilutive net income (loss) per share 12,340 11,390
================= =================
</TABLE>
Common shares related to stock options and stock warrants that are antidilutive
amounted to 337,550 shares and 1,974,765 shares for the three months ended March
31, 2000 and April 2, 1999, respectively.
Page 8 of 17
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3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements
March 31, 2000 and December 31, 1999
(Unaudited)
(7) Geographic Segment Information
All of the Company's assets are devoted to the manufacture and sale of
Company systems, together with related supplies and services. The Company
attributes revenues to geographic areas based on shipment in the country of
origination.
Summarized data for the Company's operations are as follows:
<TABLE>
<CAPTION>
USA Europe Asia Elimination Total
------------- ------------- ---------- --------------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
For the period ended March 31, 2000:
Sales to unaffiliated customers $11,506 9,270 2,236 --- $23,012
Inter-area sales $3,278 999 --- (4,277) ---
Income (loss) from operations $889 705 --- --- $1,594
For the period ended April 2, 1999:
Sales to unaffiliated customers $12,249 9,537 898 --- $22,684
Inter-area sales $ 4,624 858 --- (5,482) ---
Income (loss) from operations $(4,557) 1,386 --- (308) $(3,479)
</TABLE>
Inter-area sales to the Company's foreign subsidiaries are recorded at
amounts consistent with prices charged to distributors, which are above
cost.
Page 9 of 17
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3D SYSTEMS CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This discussion should be read in conjunction with the consolidated
financial statements and notes thereto included in Item 1 of this
Quarterly Report and the audited consolidated financial statements and
notes thereto, Management's Discussion and Analysis of Results of
Operations and Financial Condition, and Cautionary Statements and Risk
Factors for the year ended December 31, 1999 contained in the Company's
1999 Form 10-K.
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's future results could differ materially from
those discussed herein. Factors that could cause or contribute to these
differences include, but are not limited to: the ability of the Company
to contain costs, increase recurring revenue, maintain gross revenues at
a level necessary to maintain gross profit margins, the availability and
acceptance of products, the impact of competitive products and pricing,
dependence on key personnel and suppliers, industry-wide domestic and
international economic conditions and other risks detailed in the
Company's SEC report on Form 10-K for the year ended December 31, 1999
under the section entitled "Cautionary Statements and Risk Factors."
OVERVIEW
We develop, manufacture and market worldwide solid imaging systems
designed to rapidly produce physical objects from the digital output of
solid or surface data from computer aided design and manufacturing
("CAD/CAM") and related computer systems. Our systems include
SLA-Registered Trademark- stereolithography apparatus equipment and
ThermoJet-TM- solid object printers.
SLA industrial systems use our proprietary stereolithography ("SL")
technology, a solid imaging process which uses a laser beam to expose and
solidify successive layers of photosensitive epoxy resin until the desired
object is formed to precise specifications in epoxy or acrylic resin.
SL-produced parts can be used for concept models, engineering prototypes,
patterns and masters for molds, consumable tooling, and short-run
manufacturing of final product, among other applications. ThermoJet solid
object printers employ hot melt ink jet technology to build models in
successive layers using our proprietary thermoplastic material. These
printers, about the size of an office copier, are designed for operation in
engineering and design office environments. The ThermoJet solid object
printer output can be used as patterns and molds, and when combined with
other secondary processes, can produce parts with representative end-use
properties.
We have sold 1,624 systems since 1988. Our customers include major
corporations in a broad range of industries including manufacturers of
automotive, aerospace, computer, electronic, consumer, and medical
products. Our revenues are generated by product and service sales. Product
sales are comprised of sales of systems and related equipment, materials,
software and other component parts, as well as rentals of systems. Service
sales include revenues from a variety of on-site maintenance services,
customer training, services provided by our Technology Centers and
licensing of 3D Keltool-Registered Trademark- process and support services.
During the quarter ended March 31, 2000, we continued to show improvement
as a result of the new operating plan which was put in place in the fourth
quarter of 1999. The major components of this plan include margin
improvements, operating expense savings, workforce reductions, more focused
research and development activities and increased emphasis on recurring
revenues. We began to realize benefits from the new operating plan in the
fourth quarter of 1999 and we continued to realize benefits from this
operating plan in the first quarter of 2000.
Page 10 of 17
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3D SYSTEMS CORPORATION
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain items
from the Company's Statement of Operations and Total Revenues:
<TABLE>
<CAPTION>
Percentage of Total Revenues
Three Month Periods Ended
------------------------------
March 31, 2000 April 2, 1999
-------------- -------------
<S> <C> <C>
Sales:
Products 68.1% 67.4%
Services 31.9% 32.6%
-------------- -------------
Total sales 100.0% 100.0%
-------------- -------------
Cost of sales:
Products 30.2% 37.6%
Services 22.9% 21.9%
-------------- -------------
Total cost of sales 53.1% 59.5%
-------------- -------------
Total gross profit 46.9% 40.5%
Gross profit - products 55.6% 44.1%
Gross profit - services 28.3% 33.1%
Selling, general and administrative expenses 31.9% 45.1%
Research and development expenses 8.1% 10.8%
Income (loss) from operations 6.9% (15.3)%
Interest income and interest and other expense, net 0.2% 0.6%
Provision for (benefit from) income taxes 2.4% (4.7)%
Net income (loss) 4.7% (10.1)%
</TABLE>
Page 11 of 17
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3D SYSTEMS CORPORATION
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
The following table sets forth, for the periods indicated, total revenues
attributable to each of the Company's major products and services groups,
and those revenues as a percentage of total sales:
<TABLE>
<CAPTION>
Three Month Periods Ended
March 31, 2000 April 2, 1999
-------------- -------------
(in thousands,
except for percentages)
<S> <C> <C>
Products:
Systems and related equipment $ 9,258 $ 10,830
Materials 5,744 3,920
Other 670 528
-------------- -------------
Total products 15,672 15,278
-------------- -------------
Services:
Maintenance 6,528 6,488
Other 812 918
-------------- -------------
Total services 7,340 7,406
-------------- -------------
Total sales $ 23,012 $ 22,684
============== =============
Products:
Systems and related equipment 40.2% 47.7%
Materials 25.0% 17.3%
Other 2.9% 2.4%
-------------- -------------
Total products 68.1% 67.4%
-------------- -------------
Services:
Maintenance 28.4% 28.6%
Other 3.5% 4.0%
-------------- -------------
Total services 31.9% 32.6%
-------------- -------------
Total sales 100.0% 100.0%
============== =============
</TABLE>
Page 12 of 17
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3D SYSTEMS CORPORATION
Management's Discussion and Analysis of Financial Condition
And Results of Operations (Continued)
THREE MONTH PERIOD ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTH PERIOD
ENDED APRIL 2, 1999.
SALES. Sales during the three month period ended March 31, 2000, (the
"first quarter of 2000") were $23.0 million, a 1.4% increase from the $22.7
million recorded during the three month period ended April 2, 1999 (the
"first quarter of 1999").
Product sales of $15.7 million were recorded for the first quarter of 2000,
an increase of approximately 2.6% compared to $15.3 million for the first
quarter of 1999. The increase in the dollar value of product sales is due
primarily to the growth in material revenues of 46.5%. The increase in
material revenue is due primarily to the increase in the installed base of
machines and a stronger emphasis on recurring revenue related to the sale
of materials derived from post-installation sales. We expect recurring
revenue to continue to increase as a percent of total revenue as our
installed machine base increases. This is a forward-looking statement and,
as with other such statements, is subject to uncertainties. For example,
the introduction of competitive materials may negatively impact the growth
rate of recurring revenue.
System sales decreased $1.6 million or 14.5% from the prior year. The
decrease in machine sales results from several SLA industrial systems that
did not ship prior to the quarter end and fewer than expected sales of our
lower end SLA machines. System sales fluctuate from quarter to quarter, and
we do not believe that the decline in SLA industrial systems is necessarily
indicative of sales in any future quarter. These are forward-looking
statements and are subject to uncertainties. For example, the exact timing
of customer requirements and the extended procurement cycle of large dollar
capital procurement in certain companies may significantly impact product
sales in future quarters.
In addition, we believe that system orders and resultant sales may
fluctuate on a quarterly basis as a result of a number of other factors,
including world economic conditions, fluctuations in foreign currency
exchange rates, acceptance of new products and the timing of product
shipments. Due to the price of certain systems, along with overall low
shipment volumes, the acceleration or delay of a small number of shipments
from one quarter to another can significantly affect the results of
operations for the quarters involved.
Service sales during the first quarter of 2000 totaled $7.3 million, a
decrease of less than 1% from the first quarter of 1999 of $7.4 million.
The decrease is due primarily to the impact of continued competitive
pricing pressure on maintenance contracts and resultant multi-tiered
pricing introduced in April, 1999 to provide greater customer service
options and to more effectively compete in the marketplace.
Page 13 of 17
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3D SYSTEMS CORPORATION
Management's Discussion and Analysis of Financial Condition
And Results of Operations (continued)
COST OF SALES. Cost of sales decreased to $12.2 million or 53.1% of sales
in the first quarter of 2000 from $13.5 million or 59.5% of sales in the
first quarter of 1999. The decrease is a result of a reduction in product
cost of sales by $1.6 million offset by an increase of $0.3 million in
service cost of sales.
Product cost of sales as a percentage of product sales decreased to
approximately 44.4% in the first quarter of 2000 from 55.9% in the first
quarter of 1999. This decrease in the percentage of product costs to
product sales was due primarily to a reduction in manufacturing overhead
and component cost.
Service cost of sales as a percentage of service sales increased to 71.7%
in the first quarter of 2000 from 66.9% for the first quarter of 1999 as a
result of continued competitive pricing with regard to service and
maintenance contracts and a minimal increase in operating costs related to
providing maintenance and time and material services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses ("SG&A") decreased $2.9 million or 28.3% in the
first quarter of 2000 compared to the first quarter of 1999. The decrease
was primarily the result of benefits associated with the operating plan
adopted in late 1999, more focused selling and marketing efforts and costs
associated with the launch of new products in the first quarter of 1999.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses during
the first quarter of 2000 decreased $0.6 million or 23.4% compared to the
first quarter of 1999, due to more focused engineering efforts on specific
development projects and reduced costs as a result of the introduction of
new products in early 1999. Research and development expenses as a percent
of total revenue was 8.1% in the first quarter of 2000 compared to 10.8% in
the first quarter of 1999. Based on the foreseeable future, we anticipate
that research and development expenses will equal approximately 8% of
sales. This is a forward-looking statement, however, and, as with any such
statement, is subject to risk. For example, if our total sales for any
particular period do not meet our anticipated sales, research and
development expenses as a percentage of sales may exceed 8%.
OPERATING INCOME. Operating income for the first quarter of 2000 was $1.6
million or 6.9% of revenue versus an operating loss of $3.5 million or
15.3% of revenue in the first quarter of 1999. This is primarily
attributable to decreased costs related to our manufacturing operations,
decreased component costs of our systems, reduced SG&A expenses and lower
research and development expenses.
INTEREST INCOME AND INTEREST AND OTHER EXPENSE. Net other income decreased
approximately 66.7% to $42,000 in the first quarter of 2000 compared to
$126,000 in the first quarter of 1999, due primarily to a decrease in
interest income. This decrease is the result of the lower investment
balances in 2000 as compared to 1999.
Page 14 of 17
<PAGE>
3D SYSTEMS CORPORATION
Management's Discussion and Analysis of Financial Condition
And Results of Operations (Continued)
<TABLE>
<CAPTION>
LIQUIDITY AND CAPITAL RESOURCES
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Cash and cash equivalents $ 11,308 $ 12,553
Working capital 32,008 31,219
</TABLE>
<TABLE>
<CAPTION>
Three Month Periods Ended
-----------------------------------
March 31, 2000 April 2, 1999
-------------- -----------------
<S> <C> <C>
Cash used for operating activities $ (1,527) $ (5,765)
Cash used for investing activities (512) (1,163)
Cash provided by financing activities 1,167 33
</TABLE>
The use of cash for operating activities in the first quarter of 2000
primarily relates to the increase in inventory of $3.5 million and the
decrease in accrued liabilities of $0.8 million offset by net income of
$1.1 million, non-cash depreciation and amortization charges of $1.8
million and an increase in deferred maintenance revenue of $1.2 million.
In the prior year's quarter, the use of cash of $5.8 million relating to
operating activities was the result of a net loss of $2.3 million, increase
in accounts receivable of $1.7 million, increase in inventories of $1.3
million, increase in other assets of $1.4 million, and decrease in accrued
liabilities of $1.4 million, offset by other changes in current assets and
liabilities.
Net cash used for investing activities during the first quarter of 2000
totaled $0.5 million and was primarily the result of net additions to
property and equipment.
Net cash provided by financing activities during the first quarter of 2000
totaled $1.2 million and was primarily the result of the exercise of stock
options.
Currently, we are in the process of establishing a new credit facility
to provide for working capital requirements in 2000 and beyond. We
expect that the new facility will finance future sales growth and be
collateralized by a percentage of inventory and accounts receivable.
This is a forward-looking statement and is subject to uncertainties. For
example, significant changes in interest rates could have an adverse
impact on our ability to secure our primary choice of credit facility
alternatives.
We believe that funds generated from operations and existing working
capital will be sufficient to satisfy our anticipated working capital
requirements for at least the next 12 months. From time to time, we
consider the acquisition of businesses, products or technologies
complementary to our current business, although we have no current
commitments or agreements with respect to any such transactions. Should we
decide to pursue such a transaction, we may need to borrow additional
funds.
We assigned a team to address the issues raised by the introduction of the
Single European Currency ("Euro") for initial implementation as of January
1, 1999 and the transition period through to January 1, 2002. We
substantially completed the modifications to our internal systems that will
be affected by the initial introduction and transition period. We do not
expect that the introduction and use of the Euro as a single currency will
materially affect our foreign exchange position or result in any material
increase in cost to us.
YEAR 2000 COMPLIANCE. We took appropriate action to ensure that our
computer-based systems that require date/time calculations were not
negatively impacted by miscalculations and system failures on and after the
year 2000. We evaluated all products sold since inception for Year 2000
readiness, and provided the results of the analysis and potential impacts
and resolutions to our customers. The necessary upgrade pathways to our
customers were completed, and we believe that all products meet basic
functionality requirements. No significant issues have been encountered
relating to our products, our internal operating systems, or with any of
our suppliers. To date, there has been no increase in warranty or other
claims by customers as a result of the Year 2000 transition. There was no
additional impact on prior cost estimates or significant additional costs
incurred subsequent to December 31, 1999 relating to this matter and to
date no impact on results of operations, deferred spending, third party
relationships, remaining contingencies or legal proceedings.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required hereunder for the Company is not significantly
different from the information set forth in Item 7a Quantitative and
Qualitative Disclosures About Market Risk included in the 1999 Form 10-K
and is therefore not presented herein.
Page 15 of 17
<PAGE>
3D SYSTEMS CORPORATION
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial data schedule.
(b) Reports on Form 8-K
Current Report on Form 8-K, Item 5 filed on February 23, 2000.
Page 16 of 17
<PAGE>
SIGNATURES
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.
/s/ H. MICHAEL HOGAN III May 12, 2000
------------------------------- -------------------
H. Michael Hogan III Date
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
(Duly authorized to sign on behalf of Registrant)
Page 17 of 17
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