FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2009
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
For the transition period from to
Commission File No. 001-34220
3D SYSTEMS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
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DELAWARE
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95-4431352 |
(State or Other Jurisdiction of
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(I.R.S. Employer |
Incorporation or Organization)
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Identification No.) |
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333 THREE D SYSTEMS CIRCLE |
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ROCK HILL, SOUTH CAROLINA
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29730 |
(Address of Principal Executive Offices)
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(Zip Code) |
(803) 326-3900
(Registrants 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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act.) Yes o No þ
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to
be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. Yes o No o
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers classes of common stock, as
of the latest practicable date.
Shares of Common Stock, par value $0.001, outstanding as of April 30, 2009: 22,411,030
3D SYSTEMS CORPORATION
Quarterly Report on Form 10-Q for the
Quarter Ended March 31, 2009
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
3D SYSTEMS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
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March 31, |
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December 31, |
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(in thousands, except par value) |
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2009 |
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2008 |
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ASSETS
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Current assets: |
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Cash and cash equivalents |
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$ |
23,417 |
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$ |
22,164 |
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Accounts receivable, net of allowance for doubtful accounts of $2,221 (2009) and $2,015 (2008) |
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16,819 |
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25,276 |
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Inventories, net of reserves of $2,967 (2009) and $3,156 (2008) |
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19,895 |
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21,018 |
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Prepaid expenses and other current assets |
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2,354 |
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1,601 |
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Deferred income tax assets |
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995 |
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935 |
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Restricted cash |
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111 |
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3,309 |
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Total current assets |
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63,591 |
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74,303 |
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Property and equipment, net |
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22,890 |
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24,072 |
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Intangible assets, net |
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3,378 |
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3,663 |
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Goodwill |
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47,364 |
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48,010 |
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Other assets, net |
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2,962 |
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2,954 |
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$ |
140,185 |
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$ |
153,002 |
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current liabilities: |
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Industrial development bonds |
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$ |
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$ |
3,085 |
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Current portion of capitalized lease obligations |
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199 |
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195 |
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Accounts payable |
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13,716 |
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17,133 |
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Accrued liabilities |
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6,259 |
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8,057 |
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Customer deposits |
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764 |
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1,136 |
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Deferred revenue |
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8,851 |
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9,418 |
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Total current liabilities |
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29,789 |
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39,024 |
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Long-term portion of capitalized lease obligations |
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8,416 |
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8,467 |
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Other liabilities |
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3,158 |
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3,277 |
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Total liabilities |
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41,363 |
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50,768 |
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Commitments and contingencies |
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Stockholders equity: |
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Preferred Stock, authorized 5,000 shares, none issued |
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Common stock, $0.001 par value, authorized 60,000 shares; 22,484 (2009) and 22,424
(2008) issued |
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22 |
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22 |
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Additional paid-in capital |
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176,608 |
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176,180 |
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Treasury stock, at cost; 65 shares (2009) and 59 shares (2008) |
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(126 |
) |
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(120 |
) |
Accumulated deficit |
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(80,641 |
) |
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(78,557 |
) |
Accumulated other comprehensive income |
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2,959 |
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4,709 |
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Total stockholders equity |
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98,822 |
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102,234 |
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$ |
140,185 |
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$ |
153,002 |
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See accompanying notes to condensed consolidated financial statements.
3
3D SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended March 31, |
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(in thousands, except per share amounts) |
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2009 |
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2008 |
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Revenue: |
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Products |
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$ |
15,489 |
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$ |
22,765 |
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Services |
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8,542 |
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9,022 |
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Total revenue |
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24,031 |
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31,787 |
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Cost of sales: |
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Products |
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7,937 |
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12,453 |
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Services |
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5,615 |
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6,634 |
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Total cost of sales |
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13,552 |
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19,087 |
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Gross profit |
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10,479 |
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12,700 |
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Operating expenses: |
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Selling, general and administrative |
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9,188 |
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13,064 |
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Research and development |
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2,898 |
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3,597 |
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Total operating expenses |
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12,086 |
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16,661 |
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Loss from operations |
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(1,607 |
) |
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(3,961 |
) |
Interest and other expense (income), net |
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227 |
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(656 |
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Loss before income taxes |
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(1,834 |
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(3,305 |
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Provision for income taxes |
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250 |
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386 |
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Net loss |
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$ |
(2,084 |
) |
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$ |
(3,691 |
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Net loss per share basic and diluted |
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$ |
(0.09 |
) |
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$ |
(0.17 |
) |
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See accompanying notes to condensed consolidated financial statements.
4
3D SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Months Ended March 31, |
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(in thousands) |
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2009 |
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2008 |
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Cash flows from operating activities: |
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Net loss |
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$ |
(2,084 |
) |
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$ |
(3,691 |
) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
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Deferred income taxes |
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(121 |
) |
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(108 |
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Depreciation and amortization |
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1,607 |
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1,350 |
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Provisions for bad debts |
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703 |
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421 |
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Stock-based compensation |
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389 |
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480 |
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Loss on the disposition of property and equipment |
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14 |
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Changes in operating accounts: |
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Accounts receivable |
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6,449 |
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7,544 |
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Inventories |
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472 |
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(6,862 |
) |
Prepaid expenses and other current assets |
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(827 |
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(140 |
) |
Accounts payable |
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(2,520 |
) |
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(5,139 |
) |
Accrued liabilities |
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(1,612 |
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(2,014 |
) |
Customer deposits |
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(350 |
) |
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1,188 |
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Deferred revenue |
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(395 |
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(505 |
) |
Other operating assets and liabilities |
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(29 |
) |
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369 |
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Net cash provided by (used in) operating activities |
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1,682 |
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(7,093 |
) |
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Cash flows used in investing activities: |
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Purchases of property and equipment |
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(285 |
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(1,882 |
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Additions to license and patent costs |
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(37 |
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(173 |
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Net cash used in investing activities |
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(322 |
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(2,055 |
) |
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Cash flows provided by financing activities: |
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Stock option and restricted stock proceeds |
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33 |
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1,081 |
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Repayment of long-term debt |
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(49 |
) |
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(165 |
) |
Repayment of short-term borrowings |
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(3,085 |
) |
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Restricted cash |
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3,198 |
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Net cash provided by financing activities |
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97 |
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916 |
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Effect of exchange rate changes on cash |
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(204 |
) |
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475 |
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Net increase (decrease) in cash and cash equivalents |
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1,253 |
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(7,757 |
) |
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Cash and cash equivalents at the beginning of the period |
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22,164 |
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29,689 |
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Cash and cash equivalents at the end of the period |
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$ |
23,417 |
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$ |
21,932 |
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Supplemental Cash Flow Information: |
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Interest payments |
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$ |
161 |
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$ |
217 |
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Income tax payments |
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67 |
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240 |
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Non-cash items: |
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Transfer of equipment from inventory to property and equipment, net(a) |
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32 |
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3,572 |
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Transfer of equipment to inventory from property and equipment, net(b) |
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33 |
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218 |
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(a) |
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Inventory is transferred from inventory to property and equipment at
cost when the Company requires additional machines for training,
demonstration or short-term rentals. The transfer of $3,002 of
equipment purchased from a large customer is included in transfers to
property and equipment in the period ended March 31, 2008. |
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(b) |
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In general, an asset is transferred from property and equipment, net
into inventory at its net book value when the Company has identified a
potential sale for a used machine. The machine is removed from
inventory upon recognition of the sale. |
See accompanying notes to condensed consolidated financial statements.
5
3D SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(Unaudited)
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Common Stock |
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Treasury Stock |
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Accumulated |
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Par |
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Additional |
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Other |
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Total |
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Value |
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Paid in |
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Accumulated |
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Comprehensive |
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Stockholders |
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(In thousands, except par value) |
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Shares |
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$0.001 |
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Capital |
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Shares |
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Amount |
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Deficit |
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Income |
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Equity |
|
Balance at December 31, 2008 |
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22,424 |
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|
$ |
22 |
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$ |
176,180 |
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|
59 |
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|
$ |
(120 |
) |
|
$ |
(78,557 |
) |
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$ |
4,709 |
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$ |
102,234 |
|
Issuance (repurchase) of
restricted stock, net |
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60 |
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(a) |
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40 |
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6 |
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(6 |
) |
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34 |
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Stock compensation expense |
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(a) |
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388 |
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388 |
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Net loss |
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(2,084 |
) |
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(2,084 |
) |
Foreign currency translation
adjustment |
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(1,750 |
) |
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|
(1,750 |
) |
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Balance at March 31, 2009 |
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22,484 |
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|
$ |
22 |
|
|
$ |
176,608 |
|
|
|
65 |
|
|
$ |
(126 |
) |
|
$ |
(80,641 |
) |
|
$ |
2,959 |
|
|
$ |
98,822 |
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(a) |
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Amounts not shown due to rounding. |
See accompanying notes to condensed consolidated financial statements.
6
3D SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
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|
Three Months Ended March 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
Net loss |
|
$ |
(2,084 |
) |
|
$ |
(3,691 |
) |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
Unrealized gain (loss) on pension obligation |
|
|
(10 |
) |
|
|
9 |
|
Foreign currency translation adjustments |
|
|
(1,740 |
) |
|
|
2,314 |
|
|
|
|
|
|
|
|
Comprehensive loss, net |
|
$ |
(3,834 |
) |
|
$ |
(1,368 |
) |
|
|
|
|
|
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|
See accompanying notes to condensed consolidated financial statements.
7
3D SYSTEMS CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data)
(Unaudited)
(1) Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of 3D
Systems Corporation and its subsidiaries (collectively, the Company). All significant
intercompany transactions and balances have been eliminated in consolidation. The condensed
consolidated financial statements have been prepared in accordance with generally accepted
accounting principles in the United States of America (GAAP) and the rules and regulations of the
Securities and Exchange Commission (SEC) applicable to interim reports. Accordingly, they do not
include all of the information and notes required by GAAP for complete financial statements and
should be read in conjunction with the audited financial statements included in the Companys
Annual Report on Form 10-K (Form 10-K) for the year ended December 31, 2008.
In the opinion of management, the unaudited condensed consolidated financial statements
contain all adjustments, consisting of adjustments of a normal recurring nature, necessary to
present fairly the financial position, results of operations and cash flows for the periods
presented. The results of operations for the three months ended March 31, 2009 are not necessarily
indicative of the results to be expected for the full year.
The preparation of financial statements in accordance with GAAP requires management to make
estimates and assumptions that affect the amounts reported in the financial statements. Actual
results may differ from those estimates and assumptions.
Certain prior period amounts have been reclassified to conform to their current-year
presentation. These reclassifications include $730 of foreign exchange gain, that had previously
been included in product cost of sales for the first quarter of 2008, to interest and other expense
(income), net in our condensed consolidated statement of operations. This had the effect of
reducing the Companys previously reported gross profit and interest and other expense (income),
net for the first quarter of 2008 by $730 and of increasing operating loss for that quarter by the
same amount. It did not affect any of the other line items on the Companys condensed consolidated
statement of operations for 2008.
All amounts presented in the accompanying footnotes are presented in thousands, except for per
share information and years.
(2) Inventories
Components of inventories, net at March 31, 2009 and December 31, 2008 were as follows:
|
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|
|
|
|
|
|
(in thousands) |
|
2009 |
|
|
2008 |
|
Raw materials |
|
$ |
1,484 |
|
|
$ |
1,635 |
|
Inventory held by assemblers |
|
|
43 |
|
|
|
34 |
|
Work in process |
|
|
22 |
|
|
|
146 |
|
Finished goods and parts |
|
|
21,313 |
|
|
|
22,359 |
|
|
|
|
|
|
|
|
Total cost |
|
|
22,862 |
|
|
|
24,174 |
|
Less: reserves |
|
|
(2,967 |
) |
|
|
(3,156 |
) |
|
|
|
|
|
|
|
Inventories, net |
|
$ |
19,895 |
|
|
$ |
21,018 |
|
|
|
|
|
|
|
|
(3) Property and Equipment
Property and equipment at March 31, 2009 and December 31, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful Life |
|
(in thousands, except years) |
|
2009 |
|
|
2008 |
|
|
(in years) |
|
Building |
|
$ |
8,566 |
|
|
$ |
8,566 |
|
|
|
25 |
|
Machinery and equipment |
|
|
27,185 |
|
|
|
27,492 |
|
|
|
3-5 |
|
Capitalized software ERP |
|
|
3,094 |
|
|
|
3,096 |
|
|
|
5 |
|
Office furniture and equipment |
|
|
3,340 |
|
|
|
3,404 |
|
|
|
5 |
|
Leasehold improvements |
|
|
7,572 |
|
|
|
7,567 |
|
|
Life of lease |
Rental equipment |
|
|
1,064 |
|
|
|
1,116 |
|
|
|
5 |
|
Construction in progress |
|
|
228 |
|
|
|
298 |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment |
|
|
51,049 |
|
|
|
51,539 |
|
|
|
|
|
Less: Accumulated depreciation and amortization |
|
|
(28,159 |
) |
|
|
(27,467 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment, net |
|
$ |
22,890 |
|
|
$ |
24,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
Depreciation and software amortization expense for the three months ended March 31, 2009 and
2008 were $1,285 and $950, respectively. For each of the three months ended March 31, 2009 and
2008, the Company recognized software amortization expense of $134 for its capitalized enterprise
resource planning (ERP) system.
(4) Intangible Assets
Intangible assets other than goodwill at March 31, 2009 and December 31, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2009 |
|
|
|
Gross Carrying |
|
|
Accumulated |
|
|
|
|
(in thousands) |
|
Amount |
|
|
Amortization |
|
|
Net |
|
Licenses |
|
$ |
5,875 |
|
|
$ |
(5,214 |
) |
|
$ |
661 |
|
Patent costs |
|
|
16,083 |
|
|
|
(13,366 |
) |
|
|
2,717 |
|
Other intangible assets |
|
|
8,968 |
|
|
|
(8,968 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
30,926 |
|
|
$ |
(27,548 |
) |
|
$ |
3,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
Gross Carrying |
|
|
Accumulated |
|
|
|
|
(in thousands) |
|
Amount |
|
|
Amortization |
|
|
Net |
|
Licenses |
|
$ |
5,875 |
|
|
$ |
(5,090 |
) |
|
$ |
785 |
|
Patent costs |
|
|
16,078 |
|
|
|
(13,341 |
) |
|
|
2,737 |
|
Other intangible assets |
|
|
8,968 |
|
|
|
(8,827 |
) |
|
|
141 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
30,921 |
|
|
$ |
(27,258 |
) |
|
$ |
3,663 |
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2009 and 2008, the Company capitalized $48 and $173,
respectively, of costs incurred to acquire, develop and extend patents in the United States and
various other countries.
Amortization expense related to licenses for the three months ended March 31, 2009 and 2008
was $124 in each period. Amortization expense of patent costs for the three months ended March 31,
2009 and 2008 was $57 and $77, respectively. Amortization expense related to other intangible
assets for the three months ended March 31, 2009 and 2008 was $141 and $199, respectively.
(5) Accrued and Other Liabilities
Accrued liabilities at March 31, 2009 and December 31, 2008 were as follows:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2009 |
|
|
2008 |
|
Compensation and benefits |
|
$ |
2,354 |
|
|
$ |
2,239 |
|
Vendor accruals |
|
|
1,148 |
|
|
|
1,880 |
|
Accrued professional fees |
|
|
397 |
|
|
|
1,064 |
|
Accrued taxes |
|
|
1,175 |
|
|
|
1,148 |
|
Royalties payable |
|
|
601 |
|
|
|
297 |
|
Non-contractual obligation to repurchase inventory held by assemblers |
|
|
43 |
|
|
|
34 |
|
Accrued interest |
|
|
52 |
|
|
|
54 |
|
Accrued other |
|
|
489 |
|
|
|
1,341 |
|
|
|
|
|
|
|
|
|
|
$ |
6,259 |
|
|
$ |
8,057 |
|
|
|
|
|
|
|
|
Other liabilities at March 31, 2009 and December 31, 2008 were as follows:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2009 |
|
|
2008 |
|
Defined benefit pension obligation |
|
$ |
2,683 |
|
|
$ |
2,801 |
|
Other long-term liabilities |
|
|
475 |
|
|
|
476 |
|
|
|
|
|
|
|
|
|
|
$ |
3,158 |
|
|
$ |
3,277 |
|
|
|
|
|
|
|
|
9
(6) Borrowings
The Companys debt, excluding capitalized lease obligations, at March 31, 2009 and
December 31, 2008 was $0 and $3,085, respectively, and represented industrial development bonds
related to the Grand Junction facility, which was sold in December 2008. The remaining outstanding
bonds, plus accrued interest, were redeemed in January 2009. The interest rate on the bonds at
December 31, 2008 was 1.28%.
Interest expense totaled $159 in the first quarter of 2009 compared to $208 in the first
quarter of 2008, while interest income was insignificant in the first quarter of 2009 compared to
$226 in the first quarter of 2008, all reflecting the lower level of debt and lower interest rates
earned on short-term investments in 2009. Other expense totaled an insignificant amount in the
first quarter of 2009 compared to $210 in the first quarter of 2008.
(7) Hedging Activities and Financial Instruments
The Company conducts business in various countries using both the functional currencies of
those countries and other currencies to effect cross border transactions. As a result, the Company
is subject to the risk that fluctuations in foreign exchange rates between the dates that those
transactions are entered into and their respective settlement dates will result in a foreign
exchange gain or loss. When practicable, the Company endeavors to match assets and liabilities in
the same currency on its balance sheet and those of its subsidiaries in order to reduce these
risks. The Company also, when it considers it to be appropriate, enters into foreign currency
contracts to hedge exposures arising from those transactions. The Company has not adopted hedge
accounting under Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivatives and Hedging Activities, as amended by SFAS No. 137, SFAS No. 138 and SFAS No. 161, and
all gains and losses (realized or unrealized) are recognized in Interest and other expense
(income), net in the condensed consolidated statements of operations.
At March 31, 2009 and December 31, 2008, these contracts included contracts for the purchase
of currencies other than the U.S. dollar. The dollar equivalent of the foreign currency contracts
and the related fair values as of March 31, 2009 and December 31, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency |
|
|
|
Purchase Contracts |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
Notional amount |
|
$ |
2,458 |
|
|
$ |
1,680 |
|
Fair value |
|
|
2,497 |
|
|
|
1,699 |
|
|
|
|
|
|
|
|
Net unrealized gain |
|
$ |
39 |
|
|
$ |
19 |
|
|
|
|
|
|
|
|
The foreign currency contracts outstanding at March 31, 2009 expire at various times between
April 1, 2009 and May 27, 2009. The foreign currency contracts outstanding at December 31, 2008
expired at various times between January 5, 2009 and February 11, 2009.
Changes in the fair value of derivatives are recorded in interest and other expense (income),
net in the condensed consolidated statements of operations. Depending on their fair value at the
end of the reporting period, derivatives are recorded either in prepaid expenses and other current
assets or in accrued liabilities on the condensed consolidated balance sheet.
The total impact of foreign currency items on the condensed consolidated statements of
operations for the three months ended March 31, 2009 and 2008 reflected a loss of $122 and a gain
of $730, respectively.
(8) Stock-based Compensation Plans
The Company records stock-based compensation expense in selling, general and administrative
expenses in the condensed consolidated statements of operations. Stock-based compensation expense
for the three months ended March 31, 2009 and 2008 was as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
Restricted stock awards |
|
$ |
389 |
|
|
$ |
480 |
|
|
|
|
|
|
|
|
10
The number of shares of restricted common stock awarded and the weighted average fair value
per share during the three-month periods ended March 31, 2009 and 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
Weighted Average |
|
(in thousands, except per share amounts) |
|
Shares Awarded |
|
|
Fair Value |
|
|
Shares Awarded |
|
|
Fair Value |
|
Restricted stock awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted under the 2004 Incentive Stock Plan |
|
|
183 |
|
|
$ |
6.81 |
|
|
|
|
|
|
|
|
|
Granted under the 2004 Restricted Stock
Plan for Non-Employee Directors |
|
|
|
|
|
|
|
|
|
|
2 |
|
|
$ |
14.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restricted stock awards |
|
|
183 |
|
|
$ |
6.81 |
|
|
|
2 |
|
|
$ |
14.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the quarter ended March 31, 2009, the Company granted restricted stock awards covering
183 shares of common stock pursuant to the Companys 2004 Incentive Stock Plan, including 100
shares awarded to executive officers of the Company; these awards remain subject to acceptance. In
the first quarter of 2008, the Company granted restricted stock awards covering 2 shares of common
stock pursuant to the Companys 2004 Restricted Stock Plan for Non-Employee Directors.
(9) Loss Per Share
The Company presents basic and diluted earnings (loss) per share (EPS) amounts. Basic EPS is
calculated by dividing net income (loss) available to common stockholders by the weighted average
number of common shares outstanding during the applicable period. Diluted EPS is calculated by
dividing net income (loss) by the weighted average number of common and common equivalent shares
outstanding during the applicable period. The following table reconciles basic weighted average
outstanding shares to diluted weighted average outstanding shares at March 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2009 |
|
|
2008 |
|
Numerator: |
|
|
|
|
|
|
|
|
Net loss numerator for basic net loss per share |
|
$ |
(2,084 |
) |
|
$ |
(3,691 |
) |
Add: Effect of dilutive securities
|
|
|
|
|
|
|
|
|
Stock options and other equity compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss numerator for dilutive net loss per share |
|
$ |
(2,084 |
) |
|
$ |
(3,691 |
) |
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
Denominator for basic net loss per share-weighted average shares |
|
|
22,369 |
|
|
|
22,327 |
|
Add: Effect of dilutive securities
|
|
|
|
|
|
|
|
|
Stock options and other equity compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for dilutive net loss per share |
|
|
22,369 |
|
|
|
22,327 |
|
|
|
|
|
|
|
|
Loss per share |
|
|
|
|
|
|
|
|
Basic and Diluted |
|
$ |
(0.09 |
) |
|
$ |
(0.17 |
) |
|
|
|
|
|
|
|
No dilutive securities were included in the diluted weighted average shares outstanding for
the three months ended March 31, 2009 and 2008 because the effect of their inclusion would have
been anti-dilutive; that is, they would have reduced net loss per share.
(10) Income Taxes
The Company used effective tax rates of (13.6%) and (11.7%) for the three months ended
March 31, 2009 and March 31, 2008, respectively. Tax expense relates primarily to income from
foreign operations.
Tax years 2005 to 2008 remain subject to examination by the U.S. Internal Revenue Service.
Should the Company utilize any of its U.S. loss carry-forwards, which date from 1997, these would
be subject to examination. The Company files income tax returns (which are open to examination
beginning in the year shown in parentheses) in France (2004), Germany (2006), Japan (2004), Italy
(2004), Switzerland (2004) and the United Kingdom (2006).
(11) Segment Information
The Company operates in one reportable business segment in which it develops, manufactures and
markets worldwide 3-D printing, rapid prototyping and manufacturing systems designed to reduce the
time it takes to produce three-dimensional objects. The Company conducts its business through
subsidiaries in the United States, a subsidiary in Switzerland that operates a research and
production facility and sales and service offices operated by subsidiaries in the European
Community (France, Germany, the United Kingdom and Italy) and Japan,
and a branch office in Hong Kong. The Company has historically disclosed summarized financial information for the
geographic areas of operations as if they were segments in accordance with SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information.
11
Summarized financial information concerning the Companys geographical operations is
shown in the following tables:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
Revenue from unaffiliated customers: |
|
|
|
|
|
|
|
|
United States |
|
$ |
10,755 |
|
|
$ |
12,037 |
|
Germany |
|
|
5,435 |
|
|
|
7,180 |
|
Other Europe |
|
|
4,563 |
|
|
|
8,481 |
|
Asia Pacific |
|
|
3,278 |
|
|
|
4,089 |
|
|
|
|
|
|
|
|
Total |
|
$ |
24,031 |
|
|
$ |
31,787 |
|
|
|
|
|
|
|
|
The Companys revenue from unaffiliated customers by type is as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
Systems and other products |
|
$ |
4,859 |
|
|
$ |
7,842 |
|
Materials |
|
|
10,630 |
|
|
|
14,923 |
|
Services |
|
|
8,542 |
|
|
|
9,022 |
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
24,031 |
|
|
$ |
31,787 |
|
|
|
|
|
|
|
|
Intercompany sales were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2009 |
|
|
|
Intercompany Sales to |
|
|
|
United |
|
|
|
|
|
|
Other |
|
|
Asia |
|
|
|
|
(in thousands) |
|
States |
|
|
Germany |
|
|
Europe |
|
|
Pacific |
|
|
Total |
|
United States |
|
$ |
|
|
|
$ |
3,204 |
|
|
$ |
1,894 |
|
|
$ |
1,457 |
|
|
$ |
6,555 |
|
Germany |
|
|
3 |
|
|
|
|
|
|
|
713 |
|
|
|
|
|
|
|
716 |
|
Other Europe |
|
|
1,505 |
|
|
|
138 |
|
|
|
|
|
|
|
|
|
|
|
1,643 |
|
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,508 |
|
|
$ |
3,342 |
|
|
$ |
2,607 |
|
|
$ |
1,457 |
|
|
$ |
8,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2008 |
|
|
|
Intercompany Sales to |
|
|
|
United |
|
|
|
|
|
|
Other |
|
|
Asia |
|
|
|
|
|
|
States |
|
|
Germany |
|
|
Europe |
|
|
Pacific |
|
|
Total |
|
United States |
|
$ |
|
|
|
$ |
4,683 |
|
|
$ |
2,898 |
|
|
$ |
3,001 |
|
|
$ |
10,582 |
|
Germany |
|
|
34 |
|
|
|
|
|
|
|
1,962 |
|
|
|
|
|
|
|
1,996 |
|
Other Europe |
|
|
1,200 |
|
|
|
48 |
|
|
|
|
|
|
|
|
|
|
|
1,248 |
|
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,234 |
|
|
$ |
4,731 |
|
|
$ |
4,860 |
|
|
$ |
3,001 |
|
|
$ |
13,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All revenue between geographic areas is recorded at prices that provide for an allocation of
profit (loss) between entities. Income (loss) from operations and assets for each geographic area
were as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
Income (loss) from operations: |
|
|
|
|
|
|
|
|
United States |
|
$ |
(2,944 |
) |
|
$ |
(4,456 |
) |
Germany |
|
|
108 |
|
|
|
199 |
|
Other Europe |
|
|
419 |
|
|
|
448 |
|
Asia Pacific |
|
|
943 |
|
|
|
327 |
|
|
|
|
|
|
|
|
Subtotal |
|
|
(1,474 |
) |
|
|
(3,482 |
) |
Inter-segment elimination |
|
|
(133 |
) |
|
|
(479 |
) |
|
|
|
|
|
|
|
Total |
|
$ |
(1,607 |
) |
|
$ |
(3,961 |
) |
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
Assets: |
|
|
|
|
|
|
|
|
United States |
|
$ |
55,296 |
|
|
$ |
61,974 |
|
Germany |
|
|
24,532 |
|
|
|
25,762 |
|
Other Europe |
|
|
39,839 |
|
|
|
43,396 |
|
Asia Pacific |
|
|
20,518 |
|
|
|
21,870 |
|
|
|
|
|
|
|
|
Total |
|
$ |
140,185 |
|
|
$ |
153,002 |
|
|
|
|
|
|
|
|
(12) Contingencies
On March 14, 2008, DSM Desotech Inc. filed a complaint, as amended, in an action titled DSM
Desotech Inc. v. 3D Systems Corporation in the United States District Court for the Northern
District of Illinois (Eastern Division) asserting that the Company engaged in anticompetitive
behavior with respect to resins used in large-frame stereolithography machines. The complaint
further asserted that the Company is infringing on two of DSM Desotechs patents relating to
stereolithography machines. The Company understands that DSM Desotech estimates the damages
associated with its claims to be in excess of $40,000.
On or about June 6, 2008, the Company filed a motion to dismiss the non-patent causes of the
action. This motion to dismiss was granted in part and denied in part on January 26, 2009, with
leave granted to DSM Desotech to amend its complaint with respect to the dismissed claims. DSM
Desotech filed a second amended complaint on March 2, 2009 in which it reasserted the causes of
action dismissed by the Court on January 26, 2009. The Company filed an answer to the second amended
complaint on March 19, 2009 in which, among other things, it denied the material allegations of the
second amended complaint. In view of the Courts decision of January 26, 2009, discovery is
proceeding on the claims pending in this case.
The Company intends to vigorously contest all of the claims asserted by DSM Desotech.
The Company is also involved in various other legal matters incidental to its business. The
Companys management believes, after consulting with counsel, that the disposition of these other
legal matters will not have a material effect on the Companys consolidated results of operations
or consolidated financial position.
(13) Fair Value Measurements
In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair
Value Measurements (SFAS No. 157). SFAS No. 157 introduces a framework for measuring fair value
and expands required disclosure about fair value measurements of assets and liabilities. For
financial assets and liabilities, SFAS No. 157 is effective for fiscal years beginning after
November 15, 2007, and the Company has adopted the standard for those assets and liabilities as of
January 1, 2008; the impact of adoption was not significant.
SFAS No. 157 defines fair value as the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the measurement date.
SFAS No. 157 also establishes a fair value hierarchy which requires an entity to maximize the use
of observable inputs and minimize the use of unobservable inputs when measuring fair value. The
standard describes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar
assets or liabilities; quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for substantially the full term of
the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or liabilities.
The Company utilizes the market approach to measure fair value for its financial assets and
liabilities. The market approach uses prices and other relevant information generated by market
transactions involving identical or comparable assets or liabilities.
13
Assets and liabilities measured at fair value on a recurring basis are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of March 31, 2009 |
|
(in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Description |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents(1) |
|
$ |
18,329 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
18,329 |
|
Currency derivative contracts(1) |
|
|
2,497 |
|
|
|
|
|
|
|
|
|
|
|
2,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
20,826 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
20,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Unrealized gains or losses on short term investments, restricted cash
and short term investments and derivatives are recorded in Interest
and other expense (income), net in the statement of operations at
each measurement date. |
The fair market value of Level 1 currency derivative contracts at March 31, 2009 and
December 31, 2008 was as follows:
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency |
|
|
|
Purchase Contracts |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
Notional amount |
|
$ |
2,458 |
|
|
$ |
1,680 |
|
Fair value |
|
|
2,497 |
|
|
|
1,699 |
|
|
|
|
|
|
|
|
Net unrealized gain |
|
$ |
39 |
|
|
$ |
19 |
|
|
|
|
|
|
|
|
In January 2009, the Company adopted FASB Staff Position No. 157-2 (FSP FAS 157-2) for all
nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed
at fair value in the financial statements on a recurring basis (at least annually). The adoption of
FSP FAS 157-2 did not have a material impact on the Companys consolidated financial statements.
(14) International Retirement Plan
The following table shows the components of net periodic benefit costs and other amounts
recognized in the condensed consolidated statements of operations for the three months ended March
31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2009 |
|
|
2008 |
|
Service cost |
|
$ |
24 |
|
|
$ |
23 |
|
Interest cost |
|
|
22 |
|
|
|
18 |
|
|
|
|
|
|
|
|
Total |
|
$ |
46 |
|
|
$ |
41 |
|
|
|
|
|
|
|
|
(15) Recent Accounting Pronouncements
FASB Staff Position No. 157-2 delayed the effective date of SFAS No. 157 until fiscal years
beginning after November 15, 2008, and interim periods within those fiscal years, for all
nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually). The Company adopted the
standard for all nonfinancial assets and liabilities effective January 1, 2009, and the impact of
the adoption was not significant. See Note 13 to the Condensed Consolidated Financial Statements.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 requires
entities to provide enhanced disclosure about how and why the entity uses derivative instruments,
how the instruments and related hedged items are accounted for under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, and how the instruments and related hedged items
affect the financial position, results of operations, and cash flows of the entity. The statement
became effective for the Company starting in January 2009, and the impact of the adoption was not
significant.
14
In March 2009, the FASB released Proposed Staff Position SFAS 157-e, Determining Whether a
Market Is Not Active and a Transaction Is Not Distressed (SFAS 157-e). This proposal provides
additional guidance in determining whether a market for a financial asset is not active and a
transaction is not distressed for fair value measurement purposes as defined in SFAS No. 157, Fair
Value Measurements. SFAS 157-e is effective for interim periods ending after June 15, 2009, but
early adoption is permitted for interim periods ending after March 15, 2009. The Company is
assessing the impact of the proposal on its consolidated financial statements.
In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly (FSP FAS 157-4). This FSP provided additional guidance for
estimating fair value in accordance with SFAS No. 157, Fair Value Measurements, when the volume
and level of activity for the asset or liability have significantly decreased. This FSP also
included guidance on identifying circumstances that indicate a transaction is not orderly. FSP FAS
157-4 is effective for interim and annual reporting periods ending after June 15, 2009 and is
applied prospectively. The Company is assessing the impact of the
proposal on its consolidated financial statements.
In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments (FSP FAS 107-1 and APB 28-1). This proposal amends FASB Statement
No. 107, Disclosures about Fair Values of Financial Instruments, to require disclosures about
fair values of financial instruments for interim reporting periods of publicly traded companies as
well as in annual financial statements. The proposal also amends ABP Opinion No. 28, Interim
Financial Reporting, to require those disclosures in summarized financial information at interim
reporting periods. FSP FAS 107-1 and APB 28-1 is effective for interim and annual reporting periods
ending after June 15, 2009. The Company is assessing the impact
of the proposal on its consolidated financial statements.
15
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
This discussion should be read in conjunction with the condensed consolidated financial
statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q.
We are subject to a number of risks and uncertainties that may affect our future performance
that are discussed in greater detail in the sections entitled Forward-Looking Statements and
Cautionary Statements and Risk Factors at the end of this Item 2 and that are discussed or
referred to in Item 1A of Part II of this Quarterly Report on Form 10-Q.
Business Overview
We design, develop, manufacture, market and service 3-D printing, rapid manufacturing, and
prototyping systems and related products and materials that enable complex three-dimensional
objects to be produced directly from computer data without tooling, greatly reducing the time and
cost required to produce prototypes or customized production parts.
Our consolidated revenue is derived primarily from the sale of our systems, the sale of the
related materials used by the systems to produce solid objects and the provision of services to our
customers.
Results of Operations
Summary of 2009 first quarter financial results
We generated $1.3 million of net cash in the first quarter of 2009 and finished the quarter
with $23.4 million of unrestricted cash compared to $22.2 million of unrestricted cash at December
31, 2008.
In
spite of continued broad economic weakness in the global economy, which led to a 24% decline in first quarter
revenue in 2009, we were able to narrow our net loss by $1.6 million compared to the first quarter
of 2008 as our cost saving initiatives took hold. As a result, we achieved a higher gross profit
margin, lower operating costs and a $1.3 million increase in available cash for the quarter ended
March 31, 2009.
As discussed in greater detail below, revenue for the first quarter of 2009 declined by 24% to
$24.0 million from $31.8 million for the first quarter of 2008, primarily as a result of the
recessionary business environment. The greatest impact arose from lower large-frame systems sales
and lower materials sales that were only partially offset by increased sales of 3-D printers. With
the introduction of our ProJet family of 3-D printers in 2008, revenue from 3-D printers increased
by 57% compared to the first quarter of 2008.
Materials sales for the first quarter of 2009 declined by $4.3 million from the first quarter
of 2008 as revenue from materials was adversely impacted by the significant reduction in
large-frame systems sales, which are typically accompanied by significant initial materials
purchases to charge up new systems and commence production, and decreased demand due to the
downturn in the global economy.
Revenue from services fell by $0.5 million to $8.5 million in the first quarter of 2009 from
$9.0 million in the same quarter in 2008.
Foreign currency translation had a $1.8 million unfavorable impact in the first quarter of
2009 compared to a $2.0 million favorable impact in the first quarter of 2008 as the U.S. dollar
strengthened in 2009 against most major currencies, with the exception of Japanese Yen.
Our lower gross profit in the first quarter of 2009 arose primarily from our lower level of
revenue. Our cost of sales also fell due to a combination of lower sales and the initiatives
undertaken in 2008 and the first quarter of 2009 to lower our cost of sales. Our gross profit
margin increased to 43.6% in the first quarter of 2009 from 39.9% in the first quarter of 2008 as
increased supply chain efficiencies, the elimination of certain third-party logistics costs in the
U.S. and cost reductions in our field service organization more than offset lower overhead
absorption over lower sales.
Our operating expenses declined by $4.6 million in the first quarter of 2009 to $12.1 million
from $16.7 million in the 2008 quarter. The decrease reflected lower selling, general and
administrative expenses and lower research and development expenses as the impact of our previously
announced cost reduction initiatives took hold. We expect our SG&A expenses for 2009 to be in the
range of $35 to $38 million, and our research and development expenses to be in the range of $10
million to $12 million.
16
Our operating loss for the first quarter of 2009 decreased to $1.6 million from $4.0 million
in the 2008 quarter. This decrease in operating loss arose from a reduction in operating expenses in 2009,
partially offset by lower revenue and gross profit as discussed below.
First quarter comparison of revenue by class of product and service
Table 1 sets forth our change in revenue by class of product and service for the first quarter
of 2009 compared to the first quarter of 2008:
Table 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Systems and |
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
Products |
|
|
Materials |
|
|
Services |
|
|
Totals |
|
Revenue at March 31, 2008 |
|
$ |
7,842 |
|
|
|
24.7 |
% |
|
$ |
14,923 |
|
|
|
46.9 |
% |
|
$ |
9,022 |
|
|
|
28.4 |
% |
|
$ |
31,787 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core products and services |
|
|
(1,962 |
) |
|
|
(25.0 |
) |
|
|
(1,942 |
) |
|
|
(13.0 |
) |
|
|
623 |
|
|
|
6.9 |
|
|
|
(3,281 |
) |
|
|
(10.3 |
) |
New products and services |
|
|
(507 |
) |
|
|
(6.5 |
) |
|
|
(1,999 |
) |
|
|
(13.4 |
) |
|
|
(471 |
) |
|
|
(5.2 |
) |
|
|
(2,977 |
) |
|
|
(9.4 |
) |
Price/Mix |
|
|
(152 |
) |
|
|
(1.9 |
) |
|
|
486 |
|
|
|
3.3 |
|
|
|
|
|
|
|
|
|
|
|
334 |
|
|
|
1.1 |
|
Foreign currency translation |
|
|
(362 |
) |
|
|
(4.6 |
) |
|
|
(838 |
) |
|
|
(5.6 |
) |
|
|
(632 |
) |
|
|
(7.0 |
) |
|
|
(1,832 |
) |
|
|
(5.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change |
|
|
(2,983 |
) |
|
|
(38.0 |
) |
|
|
(4,293 |
) |
|
|
(28.7 |
) |
|
|
(480 |
) |
|
|
(5.3 |
) |
|
|
(7,756 |
) |
|
|
(24.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue at March 31, 2009 |
|
$ |
4,859 |
|
|
|
20.2 |
% |
|
$ |
10,630 |
|
|
|
44.2 |
% |
|
$ |
8,542 |
|
|
|
35.6 |
% |
|
$ |
24,031 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On a consolidated basis, revenue for the first quarter of 2009 declined by 24.4% to
$24.0 million from $31.8 million for the first quarter of 2008. The principal factors leading to
this $7.8 million decrease in consolidated revenue were the $6.3 million decrease in product unit
volume and the $1.8 million unfavorable effect of foreign currency translation partially offset by
the $0.3 million combined favorable effect of price and mix.
In the absence of significant large-frame systems sales, revenue from systems and other
products decreased by $3.0 million or 38% to $4.9 million for the quarter ended March 31, 2009 from
$7.8 million for the first quarter of 2008. Systems revenue fell to 20.2% of consolidated revenue
in the 2009 quarter from 24.7% in the 2008 period. The decrease from 2008 arose primarily from a
$2.5 million net decrease in unit volume of core and new products, a $0.4 million unfavorable
impact from foreign currency translation and a $0.1 million combined unfavorable effect of price
and mix. The decrease in volume from systems sales was due to lower sales
of large-frame systems that
were only partially offset by an increase in unit volume of 3-D printers.
Large-frame systems represented 9% of total systems revenue for the first quarter of 2009
compared to 57% for the first quarter of 2008, while sales of
small-frame systems and 3-D printers
accounted for the remaining 91%, increasing from 43% for the first quarter of 2008. Revenue from
3-D printers was helped by increased sales of our ProJet line of 3-D printers introduced in 2008,
which were up 57%, and by growing demand for our Dental Professional printers.
Systems orders and sales tend to fluctuate on a quarterly basis as a result of a number of
factors, including the types of systems ordered by customers, customer acceptance of newly
introduced products, the timing of product orders and shipments, global economic conditions and
fluctuations in foreign currency exchange rates. Our customers generally purchase our systems as
capital equipment items, and their purchasing decisions may have a long lead time. Due to the
relatively high list price of certain systems and the overall low unit volume of systems sales in
any particular period, the acceleration or delay of orders and shipments of a small number of
systems from one period to another can significantly affect revenue
reported for our systems sales
for the period involved. Revenue reported for systems sales in any particular period is also
affected by revenue recognition rules prescribed by generally accepted accounting principles.
However, as noted above, production and delivery of our systems is generally not characterized by
long lead times, and backlog is therefore generally not a material factor in our business.
At March 31, 2009 our backlog was approximately $0.9 million, a 35.7% reduction from the
$1.4 million of backlog at December 31, 2008. We believe that our level of backlog at March 31,
2009 is generally consistent with the normal operating trends in our business.
As used in this Managements Discussion and Analysis, the combined effect of changes in
product mix and average selling prices, sometimes referred to as price and mix effects, relates to
changes in revenue that are not able to be specifically related to changes in unit volume. Among
these changes are changes in the product mix of our materials and our systems as the trend toward
smaller, more
economical systems has continued and the influence of new systems and materials on our
operating results has grown. Our reporting systems are not currently configured to produce more
quantitative information regarding the effect of price and mix changes on revenue.
17
Revenue
from materials was also adversely impacted by the absence of large-frame systems sales, which are typically accompanied by significant initial materials purchases to charge up new
systems and commence production, and decreased demand in the global marketplace due to the
continued overall economic downturn. Revenue from materials declined by $4.3 million or 28.7% to
$10.6 million for the first quarter of 2009 from $14.9 million for the 2008 quarter and represented
44.2% of consolidated revenue in the 2009 period compared to 46.9% in the 2008 period. This
decrease was primarily the result of the $3.9 million decrease in core and new product volume, the
$0.8 million unfavorable effect of foreign currency translation, partially offset by the $0.5
million favorable combined effect of price and mix. Sales of integrated materials represented 35%
of total materials revenue in the first quarter of 2009 compared to 22% in the first quarter of
2008 and 28% in the fourth quarter of 2008, evidencing that our integrated materials strategy
continues to build momentum. Sales of integrated materials in the first quarter of 2009 increased
by 17% compared to an overall decline of 28.7% for all material sales. The decline in materials
revenue as a percentage of total revenue was primarily due to the proportionately lower decline in
service revenue in the 2009 quarter.
Revenue from services decreased by $0.5 million or 5.3% to $8.5 million for the first quarter
of 2009 from $9.0 million for the 2008 period and increased to 35.6% of consolidated revenue from
28.4% for the 2008 period. The decrease was primarily the result of unfavorable foreign currency
translation of $0.6 million and a decrease in new products and services volume of $0.5 million,
partially offset by an increase in core products volume of $0.6 million, primarily driven by the
renewal of service contracts on legacy systems.
Change in first quarter revenue by geographic region
Each geographic region contributed to our lower level of revenue in first quarter of 2009.
Table 2 sets forth the change in revenue by geographic area for the first quarter of 2009 compared
to the first quarter of 2008:
Table 2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
U.S. |
|
|
Europe |
|
|
Asia-Pacific |
|
|
Totals |
|
Revenue at March 31, 2008 |
|
$ |
12,037 |
|
|
|
37.9 |
% |
|
$ |
15,661 |
|
|
|
49.3 |
% |
|
$ |
4,089 |
|
|
|
12.9 |
% |
|
$ |
31,787 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume |
|
|
(941 |
) |
|
|
(7.8 |
) |
|
|
(3,902 |
) |
|
|
(24.9 |
) |
|
|
(1,415 |
) |
|
|
(34.6 |
) |
|
|
(6,258 |
) |
|
|
(19.7 |
) |
Price/Mix |
|
|
(341 |
) |
|
|
(2.8 |
) |
|
|
293 |
|
|
|
1.9 |
|
|
|
382 |
|
|
|
9.3 |
|
|
|
334 |
|
|
|
1.1 |
|
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
(2,054 |
) |
|
|
(13.1 |
) |
|
|
222 |
|
|
|
5.5 |
|
|
|
(1,832 |
) |
|
|
(5.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change |
|
|
(1,282 |
) |
|
|
(10.6 |
) |
|
|
(5,663 |
) |
|
|
(36.1 |
) |
|
|
(811 |
) |
|
|
(19.8 |
) |
|
$ |
(7,756 |
) |
|
|
(24.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue at March 31, 2009 |
|
$ |
10,755 |
|
|
|
44.8 |
% |
|
$ |
9,998 |
|
|
|
41.6 |
% |
|
$ |
3,278 |
|
|
|
13.6 |
% |
|
$ |
24,031 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from U.S. operations declined by $1.2 million or 10.6 % to $10.8 million in 2009 from
$12.0 million in the first quarter of 2008. The decrease was due to lower volume and the
unfavorable combined effect of price and mix.
Revenue
from non-U.S. operations at March 31, 2009 declined by $6.4 million or 32.8% to
$13.3 million from $19.7 million at March 31, 2008. Revenue from non-U.S. operations as a percent
of total revenue was 55.2% and 62.1%, respectively, at March 31, 2009 and 2008. The decline in
non-U.S. revenue, excluding the effect of foreign currency translation, was 23.5% in the first
quarter of 2009.
Revenue from European operations declined by $5.7 million or 36.1% to $10.0 million from
$15.7 million in the prior year period. This decrease was due to a $3.9 million decline in volume
and the $2.1 million unfavorable impact of foreign currency translation, partially offset by a
$0.3 million favorable combined effect of price and mix.
Revenue from Asia-Pacific operations declined by $0.8 million or 19.8% to $3.3 million from
$4.1 million in the prior year period due primarily to the unfavorable $1.4 million decrease in
volume as sales were adversely affected by the previously disclosed reorganization filing of our
largest Japanese customer. This decline in sales volume was partially offset by a $0.4 million
favorable combined effect of price and mix and $0.2 million in favorable foreign currency
translation.
18
Gross profit and gross profit margins
Table 3 sets forth gross profit and gross profit margin for our products and services for the
first quarters of 2009 and 2008:
Table 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
Gross |
|
|
% |
|
|
Gross |
|
|
% |
|
(Dollars in thousands) |
|
Profit |
|
|
Revenue |
|
|
Profit |
|
|
Revenue |
|
Systems |
|
$ |
853 |
|
|
|
17.5 |
% |
|
$ |
10 |
|
|
|
0.1 |
% |
Materials |
|
|
6,699 |
|
|
|
63.0 |
|
|
|
10,302 |
|
|
|
69.0 |
|
Services |
|
|
2,927 |
|
|
|
34.3 |
|
|
|
2,388 |
|
|
|
26.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
10,479 |
|
|
|
43.6 |
% |
|
$ |
12,700 |
|
|
|
39.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We reclassified $0.7 million of foreign exchange gains, that had previously been included in
product cost of sales for the first quarter of 2008, to interest and other expense (income), net in
our condensed consolidated statement of operations. This had the effect of reducing our previously
reported gross profit and interest and other expense (income), net for the first quarter of 2008
by $0.7 million and of increasing operating loss for that quarter by the same amount. It did not
affect any of the other line items on our condensed consolidated statement of operations for 2008,
and this management discussion and analysis reflects the results of this reclassification.
On a consolidated basis, gross profit for the first quarter of 2009 decreased by $2.2 million
to $10.5 million from $12.7 million in the first quarter of 2008, primarily as a result of lower
materials sales and lower large-frame systems revenue.
Consolidated gross profit margin in the first quarter of 2009 increased by 3.7 percentage
points to 43.6% of revenue from 39.9% of revenue for the 2008 quarter. Countering the adverse
effect of our lower revenue, the increase in gross profit margin reflected the effect of various
cost savings initiatives that we pursued in 2008 and the first quarter of 2009, which included
certain supply chain efficiencies, the movement of certain third-party logistics activities
in-house, the sale of system upgrades and a reduction in field service costs. We believe these
initiatives will improve gross profit margin by $1 million per quarter on a sustainable basis,
which we expect will be fully realized after the first quarter of 2009.
Systems
gross profit for the first quarter of 2009 increased to $0.9 million from a nominal
amount for the 2008 quarter, and gross profit margin for systems increased by 17.4 percentage
points to 17.5% of revenue from 0.1% of revenue in the 2008 quarter primarily due to increased
supply chain efficiencies and lower system refurbishment costs, partially offset by the decline in
volume discussed above resulting in the absorption of fixed costs over fewer units.
Materials gross profit for the first quarter of 2009 decreased by $3.6 million or 35.0% to
$6.7 million from $10.3 million for the 2008 quarter, and gross profit margin for materials
decreased by 6.0 percentage points to 63.0% of revenue from 69.0% of revenue in the 2008 quarter
primarily due to the decline in sales volume of materials, which was adversely affected by the
lower level of large-frame systems sales.
Gross profit for services for the first quarter of 2009 increased by $0.5 million or 22.6% to
$2.9 million from $2.4 million for the 2008 quarter, and gross profit margin for services increased
by 7.8 percentage points to 34.3% of revenue from 26.5% of revenue in the 2008 quarter. The
improved gross profit was due to the combined effect of a decline in fixed costs associated with
our decision to cease servicing certain legacy products, resolution of the premature failure of
certain system components and reductions in field service costs initiated in 2008.
19
Operating expenses
As shown in Table 4, total operating expenses decreased by $4.6 million or 27.5% to
$12.1 million in the first quarter of 2009 from $16.7 million in the first quarter of 2008 as our
cost savings initiatives have gained traction, as evidenced by continued declines in operating
expenses in each of the last six quarters. This decrease was primarily due to $3.9 million in lower
selling, general and administrative expenses and $0.7 million of lower research and development
expenses, both of which are discussed below.
Table 4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
(Dollars in thousands) |
|
Amount |
|
|
Revenue |
|
|
Amount |
|
|
Revenue |
|
Selling, general and administrative expenses |
|
$ |
9,188 |
|
|
|
38.2 |
% |
|
$ |
13,064 |
|
|
|
41.1 |
% |
Research and development expenses |
|
|
2,898 |
|
|
|
12.1 |
|
|
|
3,597 |
|
|
|
11.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
$ |
12,086 |
|
|
|
50.3 |
% |
|
$ |
16,661 |
|
|
|
52.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
Selling, general and administrative expenses declined by $3.9 million to $9.2 million in the
first quarter of 2009 compared to $13.1 million in the first quarter of 2008 primarily related to
a:
|
|
|
$1.3 million decline in compensation costs primarily due to lower staffing levels; |
|
|
|
$0.6 million of lower expenses compared to the first quarter 2008 associated with the
Audit Committee investigation of anonymous claims of wrongdoing by certain members of
management, which claims were found to be baseless; |
|
|
|
$0.5 million of lower accounting fees; |
|
|
|
$0.4 million of lower contract labor and consultant costs; |
|
|
|
$0.3 million of lower travel expenses; |
|
|
|
$0.3 million of lower occupancy costs; |
|
|
|
$0.2 million of lower commissions to outside agents; and |
|
|
|
$0.1 million of lower advertising expenses. |
These reductions were partially offset by $0.3 million of higher bad debt expense.
Research and development expenses
Research and development expenses decreased by $0.7 million or 19.4% to $2.9 million in the
first quarter of 2009 from $3.6 million in the first quarter of 2008, principally due to a $0.5
million decrease in outside consulting services in the 2009 quarter and the reduction in costs for
2009 following the commercialization of certain of our new products previously announced in 2008.
Loss from operations
Our loss from operations for the first quarter of 2009 decreased by $2.4 million to
$1.6 million from $4.0 million in 2008 including the effect of the first quarter 2008
reclassification discussed above. See Gross profit and gross profit margins above.
Our reduced loss from operations in the first quarter of 2009 reflected our higher gross
profit margin and our lower operating expenses, which partially offset the effect of our lower
consolidated revenue.
The following table sets forth operating loss by geographic area for the first quarter of 2009
compared to 2008:
Table 5
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(Dollars in thousands) |
|
2009 |
|
|
2008 |
|
Income (loss) from operations: |
|
|
|
|
|
|
|
|
United States |
|
$ |
(2,944 |
) |
|
$ |
(4,456 |
) |
Germany |
|
|
108 |
|
|
|
199 |
|
Other Europe |
|
|
419 |
|
|
|
448 |
|
Asia Pacific |
|
|
943 |
|
|
|
327 |
|
|
|
|
|
|
|
|
Subtotal |
|
|
(1,474 |
) |
|
|
(3,482 |
) |
Inter-segment elimination |
|
|
(133 |
) |
|
|
(479 |
) |
|
|
|
|
|
|
|
Total |
|
$ |
(1,607 |
) |
|
$ |
(3,961 |
) |
|
|
|
|
|
|
|
20
With respect to the U.S., in 2009 and 2008, the changes in operating loss by geographic area
reflected the same factors relating to our consolidated operating loss that are discussed above. As
most of our operations outside the U.S. are conducted through sales and marketing subsidiaries, the
changes in operating income (loss) in our operations outside the U.S. in each of 2009 and 2008
resulted primarily from changes in transfer pricing.
Operating income from our Asia-Pacific operations includes an additional $0.5 million bad debt
provision related to 2009 sales to our largest Japanese customer, who filed for court protection in
February 2009. Receivables prior to the filing have been fully reserved, while sales subsequent to
the filing have been on a cash basis.
Interest and other expense (income), net
Interest and other expense (income), net amounted to $0.2 million of net expense in the first
quarter of 2009 compared with $0.7 million of income, net in the 2008 quarter, after giving effect
to the reclassification discussed above. See Gross profit and gross profit margins above.
The $0.2 million of net expense in the first quarter of 2009 reflected other income of $0.1
million and an insignificant amount of interest income in the first quarter of 2009 that was more
than fully offset by $0.2 million of interest expense and $0.1 million of foreign exchange losses.
The reduction in interest expense from 2008 resulted from the repayment of the outstanding
industrial development bonds in January 2009, while the lower interest income was the result of our
having moved our short-term investments into U.S. Treasury funds.
We recognized $0.7 million of interest and other income, net in the first quarter of 2008
reflecting a $0.7 million foreign exchange gain (after giving effect to the reclassification
discussed above. See Gross profit and gross profit margins above), and $0.2 million of interest
income, partially offset by $0.2 million of interest expense.
Provision for income taxes
We recorded a $0.3 million provision for income taxes in the first quarter of 2009 and $0.4
million in 2008. Our provision for income taxes in both periods primarily reflects tax expense
associated with income taxes in foreign jurisdictions.
Net loss
Our net loss for the first quarter of 2009 improved to $2.1 million compared to a $3.7 million
net loss in the first quarter of 2008. The principal reasons for our lower net loss, which were
discussed in more detail above, were:
|
|
|
the $2.4 million reduction in our operating loss; partially offset by |
|
|
|
the $0.9 million increase in interest and other expense (income), net. |
For
the three months ended March 31, 2009, our weighted average
common shares outstanding was 22.4 million, and on a per share basis the basic and diluted loss per share was $0.09. For the
three months ended March 31, 2008, our weighted average common
shares outstanding was 22.3 million, and on a per share basis the basic and diluted net loss per share was $0.17.
Financial Condition and Liquidity
We generated $1.3 million of net cash in the first quarter of 2009 and finished the quarter
with $23.4 million of unrestricted cash compared to $22.2 million of unrestricted cash at December
31, 2008. This $1.3 million increase in net cash included $1.7 million of cash provided by
operating activities, consisting of $1.2 million of cash provided by net changes in operating
accounts and $2.6 million of non-cash charges that were included in our net loss, partially offset
by our $2.1 million net loss. We also used $0.3 million of cash in investing activities, and
generated $0.1 million of cash from financing activities in
2009. See Working capital, Cash
flow and Outstanding debt and capitalized lease obligations below.
During 2009, we intend to continue to rely upon our unrestricted cash and cash flow from
operations to meet our liquidity needs. While we believe that the actions taken in 2008 and 2009 to
reduce our operating costs, improve our gross profit margin and manage working capital should
benefit us in 2009, there can be no assurance in these uncertain economic times that these actions
will be sufficient.
21
Following the redemption of our remaining outstanding industrial development bonds in January
2009, our principal contractual commitments consist of the capital leases on our Rock Hill
facility, which are discussed in greater detail below.
Working capital
Our net working capital decreased by $1.5 million to $33.8 million at March 31, 2009 from
$35.3 million at December 31, 2008. Table 6 provides a summary of the net changes in working
capital items between these two dates.
Table 6
|
|
|
|
|
|
|
Increase |
|
(Dollars in thousands) |
|
(Decrease) |
|
Working capital at December 31, 2008 |
|
$ |
35,279 |
|
Changes in current assets: |
|
|
|
|
Cash and cash equivalents |
|
|
1,253 |
|
Accounts receivable, net of allowances |
|
|
(8,457 |
) |
Inventories, net of reserves |
|
|
(1,123 |
) |
Prepaid expenses and other current assets |
|
|
753 |
|
Deferred income tax assets |
|
|
60 |
|
Restricted cash |
|
|
(3,198 |
) |
|
|
|
|
Total current assets |
|
|
(10,712 |
) |
Changes in current liabilities: |
|
|
|
|
Current portion of long-term debt |
|
|
(3,085 |
) |
Current portion of capitalized lease obligations |
|
|
4 |
|
Accounts payable |
|
|
(3,417 |
) |
Accrued liabilities |
|
|
(1,798 |
) |
Customer deposits |
|
|
(372 |
) |
Deferred revenue |
|
|
(567 |
) |
|
|
|
|
Total current liabilities |
|
|
(9,235 |
) |
|
|
|
|
Net change in working capital |
|
|
(1,477 |
) |
|
|
|
|
Working capital at March 31, 2009 |
|
$ |
33,802 |
|
|
|
|
|
Our unrestricted cash and cash equivalents increased by $1.3 million to $23.4 million from
$22.2 million at December 31, 2008. This increase resulted from $1.7 million of cash provided by
operating activities and $0.1 million of cash provided by financing activities, partially offset by
$0.3 million of cash used in investing activities and an unfavorable $0.2 million effect of
exchange rate changes on cash. See Cash flow below.
Accounts receivable, net, decreased by $8.5 million to $16.8 million at March 31, 2009 from
$25.3 million at December 31, 2008. This decline was primarily attributable to the collection of
year end 2008 accounts receivable balances, which were primarily composed of sales from the fourth
quarter. Accounts receivable declined due to lower sales and a decrease in days sales outstanding
to 63 days at March 31, 2009 from 66 days at December 31, 2008. Our gross accounts receivable
declined by $8.3 million from December 31, 2008 to March 31, 2009. Accounts receivable more than
90 days past due increased to 8.7% of gross receivables at March 31, 2009 compared to 5.9% of gross
receivables at December 31, 2008.
Bad debt expense for the first quarter of 2009 was $0.7 million compared to $0.4 million in
2008. Our allowance for doubtful accounts increased to $2.2 million at March 31, 2009 from $2.0
million at December 31, 2008. This increase primarily relates to 2009
sales to our largest Japanese customer prior to their filing for court protection in February
2009. Together with the amounts reserved in the fourth quarter of 2008 related to 2008 sales to
this customer, all amounts owing from this customer have been fully reserved as of March 31, 2009.
22
Components of inventories were as follows:
Table 7
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
(Dollars in thousands) |
|
2009 |
|
|
2008 |
|
Raw materials |
|
$ |
1,484 |
|
|
$ |
1,635 |
|
Inventory held by assemblers |
|
|
43 |
|
|
|
34 |
|
Work in process |
|
|
22 |
|
|
|
146 |
|
Finished goods and parts |
|
|
21,313 |
|
|
|
22,359 |
|
|
|
|
|
|
|
|
Total cost |
|
|
22,862 |
|
|
|
24,174 |
|
Less: reserves |
|
|
(2,967 |
) |
|
|
(3,156 |
) |
|
|
|
|
|
|
|
Inventories, net |
|
$ |
19,895 |
|
|
$ |
21,018 |
|
|
|
|
|
|
|
|
Inventories decreased by $1.1 million to $19.9 million at March 31, 2009 from $21.0 million at
December 31, 2008. This decrease resulted primarily from a $1.0 million decrease in finished goods inventory
as our inventory reduction initiatives began to show results. We maintained $3.0 million of
inventory reserves at March 31, 2009 and $3.2 million of such reserves at December 31, 2008.
As shown in Table 7 above, with the outsourcing of substantially all of our equipment assembly
and refurbishment activities, the majority of our inventory now consists of finished goods,
including primarily systems, materials and service parts, as our third-party assemblers have taken
over supply chain responsibility for the assembly and refurbishment of systems. As a result, we
generally no longer hold in inventory most parts for systems production or refurbishment. The
inventory held by assemblers shown in Table 7 and a related accrued liability in an amount that
corresponds to the book value of inventory held by assemblers included in accrued liabilities on
our Condensed Consolidated Balance Sheets relate to the accounting for our outsourcing arrangements
pursuant to SFAS No. 49.
Accounts payable declined by $3.4 million to $13.7 million at March 31, 2009 from
$17.1 million at December 31, 2008. The decline primarily related to lower payables that
corresponded to lower cost of sales in the quarter ended March 31, 2009 compared to the quarter
ended December 31, 2008, and the impact of our continuing cost reduction initiatives.
Customer deposits decreased by $0.4 million to $0.8 million at March 31, 2009 as a result of
the reduction in backlog from December 31, 2008 to March 31, 2009.
Deferred revenue decreased by $0.5 million to $8.9 million at March 31, 2009 from $9.4 million
at December 31, 2008 primarily due to a net decrease in maintenance contracts, installation,
training and warranty revenue from the first three months of 2009 shipments.
Restricted
cash decreased by $3.2 million as we retired the remaining outstanding industrial
development bonds, which were provided for in restricted cash at December 31, 2008.
The changes in the first quarter of 2009 that comprise the other components of working capital
not discussed above arose in the ordinary course of business. These components of working capital
include $6.3 million of accrued liabilities, $2.4 million of prepaid expenses and other current
assets, $1.0 million of deferred tax assets and $0.2 million in current installments of capitalized
lease obligations.
Differences between the amounts of working capital item changes in the cash flow statement and
the balance sheet changes for the corresponding items are primarily the result of foreign currency
translation adjustments.
Cash flow
Table 8 summarizes the cash provided by or used in operating activities, investing activities
and financing activities, as well as the effect of changes in foreign currency exchange rates on
cash, for the first three months of 2009 and 2008.
Table 8
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) operating activities |
|
$ |
1,682 |
|
|
$ |
(7,093 |
) |
Cash used in investing activities |
|
|
(322 |
) |
|
|
(2,055 |
) |
Cash provided by financing activities |
|
|
97 |
|
|
|
916 |
|
Effect of exchange rate changes on cash |
|
|
(204 |
) |
|
|
475 |
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
1,253 |
|
|
$ |
(7,757 |
) |
|
|
|
|
|
|
|
23
Cash flow from operations
For the three months ended March 31, 2009, our operating activities provided $1.7 million of
net cash. This source of cash consisted of $1.2 million of cash provided by net changes in
operating accounts and $2.6 million of non-cash items included in our net loss that were partially
offset by our $2.1 million net loss.
Changes in operating accounts that resulted in a use of cash included the following:
|
|
|
a $0.8 million increase in prepaid expenses and other current assets; |
|
|
|
a $2.5 million decrease in accounts payable; |
|
|
|
a $1.6 million decrease in accrued liabilities; |
|
|
|
a $0.4 million decrease in customer deposits; and |
|
|
|
a $0.4 million decrease in deferred revenue. |
Changes in operating accounts that resulted in a source of cash included the following:
|
|
|
a $6.4 million decrease in net receivables; and |
|
|
|
a $0.5 million decrease in inventories. |
For the three months ended March 31, 2008, we used $7.1 million of net cash for operating
activities. This use of cash consisted of our $3.7 million net loss and $5.6 million of cash
consumed by net changes in operating accounts that were partially offset by $2.2 million of
non-cash items included in our net loss.
Changes in operating accounts that resulted in a use of cash included the following:
|
|
|
a $6.9 million increase in inventories; |
|
|
|
a $5.1 million decrease in accounts payable; and |
|
|
|
a $2.0 million decrease in accrued liabilities. |
Changes in operating accounts that resulted in a source of cash included the following:
|
|
|
a $7.5 million decrease in net receivables; and |
|
|
|
a $1.2 million increase in customer deposits. |
Cash flow from investing activities
Net cash used in investing activities in the first three months of 2009 decreased to
$0.3 million from $2.1 million for the first three months of 2008. This decrease was primarily due
to our lower level of 2009 capital expenditures.
We expect our capital expenditures for 2009 to range between $1 million and $3 million.
Cash flow from financing activities
Net cash provided by financing activities decreased to $0.1 million for the three months ended
March 31, 2009 compared to $0.9 million in the 2008 period. This decrease resulted primarily from
$3.1 million of debt payments, partially offset by net proceeds from stock-based compensation.
24
Outstanding debt and capitalized lease obligations
Our Grand Junction, Colorado facility was financed by industrial development bonds in the
original aggregate principal amount of $4.9 million. In January 2009, the remaining outstanding
bonds of $3.1 million, plus accrued and unpaid interest, were redeemed in accordance with their
terms utilizing the restricted cash set aside for such purpose.
At March 31, 2009, capitalized lease obligations decreased to $8.6 million from $8.7 million
at December 31, 2008 primarily due to scheduled payments of principal on capital lease
installments.
Our outstanding industrial development revenue bonds and capitalized lease obligations at
March 31, 2009 and December 31, 2008 were as follows:
Table 9
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
(Dollars in thousands) |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Debt: |
|
|
|
|
|
|
|
|
Industrial development revenue bonds |
|
$ |
|
|
|
$ |
3,085 |
|
|
|
|
|
|
|
|
Capitalized lease obligations: |
|
|
|
|
|
|
|
|
Current portion of capitalized lease obligations |
|
|
199 |
|
|
|
195 |
|
Capitalized lease obligations, less current portion |
|
|
8,416 |
|
|
|
8,467 |
|
|
|
|
|
|
|
|
Total capitalized lease obligations |
|
|
8,615 |
|
|
|
8,662 |
|
|
|
|
|
|
|
|
Total current portion |
|
|
199 |
|
|
|
3,280 |
|
Total long-term portion |
|
|
8,416 |
|
|
|
8,467 |
|
|
|
|
|
|
|
|
Total debt and capitalized lease obligations |
|
$ |
8,615 |
|
|
$ |
11,747 |
|
|
|
|
|
|
|
|
Capitalized lease obligations
Following the redemption of the industrial development bonds in January 2009, our principal
contractual commitments consist of capitalized lease obligations of $8.6 million at March 31, 2009.
Outstanding capitalized lease obligations relate to two lease agreements that we entered into
during 2006 with respect to our Rock Hill facility, one of which covers the facility itself and the
other of which covers certain furniture and fixtures that we acquired for use in the facility. The
carrying value of the headquarters facility and the furniture and fixture leases at March 31, 2009
and December 31, 2008 was $8.6 million and $8.7 million, respectively.
Financial instruments
We conduct business in various countries using both the functional currencies of those
countries and other currencies to effect cross border transactions. As a result, we are subject to
the risk that fluctuations in foreign exchange rates between the dates that those transactions are
entered into and their respective settlement dates will result in a foreign exchange gain or loss.
When practicable, we endeavor to match assets and liabilities in the same currency on our balance
sheet and those of our subsidiaries in order to reduce these risks. We also, when we consider it to
be appropriate, enter into foreign currency contracts to hedge exposures arising from those
transactions. We have not adopted hedge accounting under SFAS No. 133, Accounting for Derivatives
and Hedging Activities, as amended by SFAS No. 137, SFAS No. 138 and SFAS No. 161, and we
recognize all gains and losses (realized or unrealized) in cost of sales in our Condensed
Consolidated Statements of Operations.
The dollar equivalent of our foreign currency contracts and their related fair values as of
March 31, 2009 and December 31, 2008 were as follows:
Table 10
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency |
|
|
|
Purchase Contracts |
|
(Dollars in thousands) |
|
2009 |
|
|
2008 |
|
Notional amount |
|
$ |
2,458 |
|
|
$ |
1,680 |
|
Fair value |
|
|
2,497 |
|
|
|
1,699 |
|
|
|
|
|
|
|
|
Net unrealized gain |
|
$ |
39 |
|
|
$ |
19 |
|
|
|
|
|
|
|
|
25
At March 31, 2009 and December 31, 2008, the notional amount of these contracts at their
respective settlement dates amounted to $2.5 million and $1.7 million, respectively. The 2009 and
2008 contracts related primarily to purchases of inventory from third parties. The notional amount
of the purchase contracts aggregated CHF 2.8 million and CHF 1.8 million.
The net fair value of all foreign exchange contracts at March 31, 2009 and December 31, 2008
reflected nominal unrealized gains at March 31, 2009 and December 31, 2008. The foreign currency
contracts outstanding at December 31, 2008 expired at various times between January 5, 2009 and
February 11, 2009. The foreign currency contracts outstanding at March 31, 2009 expire at various
times between April 1, 2009 and May 27, 2009.
Changes in the fair value of derivatives are recorded in interest and other expense (income),
net, in our Condensed Consolidated Statements of Operations. Depending on their fair value at the
end of the reporting period, derivatives are recorded either in prepaid and other current assets or
in accrued liabilities in our Condensed Consolidated Balance Sheets.
The total impact of foreign currency related items on our Condensed Consolidated Statements of
Operations was a $0.1 million loss in the three months ended March 31, 2009 and a $0.7 million gain
for the first quarter of 2008.
Stockholders equity
Stockholders equity decreased by $3.4 million to $98.8 million at March 31, 2009 from
$102.2 million at December 31, 2008. This decrease was composed of the following:
|
|
|
Our $2.1 million net loss reported for the first three months of 2009; and |
|
|
|
$1.7 million of foreign currency translation adjustments included in accumulated other
comprehensive income. |
This $3.8 million decrease in stockholders equity was partially offset by $0.4 million of
stock compensation expense recorded in stockholders equity in accordance with SFAS No. 123(R)
during the first quarter of 2009.
Recent Accounting Pronouncements
For information with respect to recent accounting pronouncements and the impact of these
pronouncements on our consolidated financial statements, see Note 15 to the Condensed Consolidated
Financial Statements.
Critical Accounting Policies and Significant Estimates
For a discussion of our critical accounting policies and estimates, refer to Managements
Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting
Policies and Significant Estimates in our Annual Report on Form 10-K for the year ended
December 31, 2008.
Forward-Looking Statements
Certain statements made in this Quarterly Report on Form 10-Q that are not statements of
historical or current facts are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements include the cautionary
statements and risk factors set forth below as well as other statements made in the Quarterly
Report on Form 10-Q that may involve known and unknown risks, uncertainties and other factors that
may cause our actual results, performance or achievements to be materially different from
historical results or from any future results expressed or implied by such forward-looking
statements.
In addition to statements that explicitly describe such risks and uncertainties, readers are
urged to consider statements in future or conditional tenses or that includes terms such as
believes, belief, expects, intends, anticipates or plans to be uncertain and
forward-looking. Forward-looking statements may include comments as to our beliefs and expectations
as to future events and trends affecting our business. Forward-looking statements are based upon
managements current expectations concerning future events and trends and are necessarily subject
to uncertainties, many of which are outside of our control. The factors stated under the heading
Cautionary Statements and Risk Factors set forth below and those described in our other SEC
reports, including our Form 10-K for the year ended December 31, 2008, as well as other factors,
could cause actual results to differ materially from those reflected or predicted in
forward-looking statements.
26
Any forward-looking statements are based on managements beliefs and assumptions, using
information currently available to us. We assume no obligation, and do not intend, to update these
forward-looking statements.
If one or more of these or other risks or uncertainties materialize, or if our underlying
assumptions prove to be incorrect, actual results may vary materially from those reflected in or
suggested by forward-looking statements. Any forward-looking statement you read in this Quarterly
Report on Form 10-Q reflects our current views with respect to future events and is subject to
these and other risks, uncertainties and assumptions relating to our operations, results of
operations, growth strategy and liquidity. All subsequent written and oral forward-looking
statements attributable to us or individuals acting on our behalf are expressly qualified in their
entirety by this paragraph. You should specifically consider the factors identified or referred to
in this Quarterly Report on Form 10-Q and our other SEC reports, including our Annual Report on Form 10-K for the year
ended December 31, 2008, which would cause actual results to differ from those referred to in
forward-looking statements.
Cautionary Statements and Risk Factors
We recognize that we are subject to a number of risks and uncertainties that may affect our
future performance. The risks and uncertainties described below are not the only risks and
uncertainties that we face. Additional risks and uncertainties not currently known to us or that we
currently deem not to be material also may impair our business operations. If any of the following
risks actually occur, our business, results of operations and financial condition could suffer. In
that event the trading price of our common stock could decline, and you may lose all or part of
your investment in our common stock. The risks discussed below also include forward-looking
statements, and our actual results may differ substantially from those discussed in these
forward-looking statements.
These risks include and relate to:
|
|
|
our ability to generate cash flow from operations and our access to financing and other
sources of capital; |
|
|
|
financial difficulties that may be experienced by our suppliers, resellers or customers; |
|
|
|
global, economic, political and social conditions which may harm our ability to do
business, increase our costs and negatively affect our stock price; |
|
|
|
our ability to deliver products that meet changing technology and customer needs; |
|
|
|
the costs from our business outside the U.S. which may increase or our revenue from such
operations that may decrease, which could have a significant impact on our overall results
of operations and financial condition; |
|
|
|
the potential impairment of certain intangible assets, which could adversely impact our
future earnings and stock price as well as our ability to obtain financing; |
|
|
|
the costs of enforcing or acquiring intellectual property rights and defending against
third-party claims as a result of litigation or other proceedings; |
|
|
|
the risk that competition could cause our revenue and gross profit margins to decline.
Competition in our industry could cause us to reduce sales prices or to incur additional
marketing or production costs, which could result in decreased revenue, increased costs and
reduced margins; |
|
|
|
our dependence upon a single or limited number of suppliers for components and
sub-assemblies; |
|
|
|
our dependence upon our suppliers generally; |
|
|
|
any failure, inadequacy, interruption, or security lapse in the enterprise resource
systems or the related technology upon which we rely, which could adversely affect our
ability to effectively operate our business; |
|
|
|
changes in energy-related expenses; |
|
|
|
the effect new pronouncements by accounting authorities may have on operational,
financial and reporting aspects of our Company; |
27
|
|
|
our success in entering new marketplaces and acquiring and integrating new businesses; |
|
|
|
the impact of the mix of products on our gross profit margin, which could cause
fluctuations in our net income or loss; |
|
|
|
our potential involvement in product liability claims and litigation; |
|
|
|
our ability to develop and commercialize successful new products; |
|
|
|
our stock being delisted if we fail to file our required periodic filings with the SEC on
a timely basis; |
|
|
|
if our internal control over financial reporting or disclosure controls and procedures
are not effective, there may be errors in our financial statements the could require a
restatement, which negatively affects our ability to report our results of operations and
financial condition accurately and in a timely manner; |
|
|
|
factors beyond our control that cause fluctuations in our operating results; |
|
|
|
our stockholders rights plan and laws that inhibit takeovers; |
|
|
|
variations in our operating results from quarter to quarter; |
|
|
|
the low daily trading volume
of our common stock and the volatility of our stock price; |
|
|
|
dilution of ownership and negative impact in the market price of our common stock due to
the exercise of our outstanding stock options; |
|
|
|
our ability to issue preferred stock. |
For a more detailed discussion of such risks and uncertainties, see Item 1A. Risk Factors in
our Annual Report on Form 10-K for the year ended December 31, 2008 and the risk factors noted in
our other SEC filings.
Except as required by the federal securities laws, we undertake no obligation to publicly
update or revise any forward-looking statement, whether as a result of new information, future
events or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
For a discussion of market risks at December 31, 2008, refer to Item 7A, Quantitative and
Qualitative Disclosures about Market Risk, in our Annual Report on Form 10-K for the year ended
December 31, 2008. During the first three months of 2009, there were no material changes or
developments that would materially alter the market risk assessment performed as of December 31,
2008, except as discussed in the Financial Condition and Liquidity section under Financial
Instruments.
Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures
As of March 31, 2009, we carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
1934, as amended (the Exchange Act.)) pursuant to Rules 13a-15 and 15d-15 under the Exchange Act.
These controls and procedures are designed to provide assurance that information required to be
disclosed in the reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and forms and that
such information is accumulated and communicated to management, including our Chief Executive
Officer and Chief Financial Officer, in a manner that is intended to allow timely decisions
regarding required disclosures.
28
Based on this evaluation, management has concluded that our disclosure controls and procedures
were effective as of March 31, 2009 to provide reasonable assurance that the consolidated financial
statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects,
our financial position, results of operations and cash flows for the periods presented in
conformity with GAAP and that they are free of material errors.
Internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act. Internal control over financial reporting is a process designed under the supervision of our
principal executive and principal financial officers to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP.
Our internal control over financial reporting is supported by written policies and procedures
that pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets, provide reasonable assurance that
transactions are recorded as necessary to permit the preparation of financial statements in
accordance with GAAP and that our receipts and expenditures are being made and recorded only in
accordance with the authorizations of our management and provide reasonable assurance regarding the
prevention or timely detection of unauthorized acquisition, use or disposition of our assets that
could have a material effect on our financial statements.
Under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of
our internal control over financial reporting as of March 31, 2009 based on the criteria
established in Internal Control Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Our assessment included an evaluation of the
design of our internal control over financial reporting and testing of the operational
effectiveness our internal control over financial reporting. Based upon this evaluation, our
management has concluded that our internal control over financial reporting was effective as of
March 31, 2009.
Because of its inherent limitations, a system of internal control over financial reporting can
provide only reasonable assurance and may not prevent or detect misstatements. In addition,
projections of any evaluation of effectiveness to future periods are subject to the risks that
controls may become inadequate because of changes in conditions and that the degree of compliance
with policies and procedures may deteriorate.
Changes in Internal Controls over Financial Reporting
There were no material changes in our internal control over financial reporting during the
period covered by this Quarterly Report on Form 10-Q that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
29
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
The information set forth in Note 12 of the Condensed Consolidated Financial Statements in
Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.
Item 1A. Risk Factors.
There have been no material changes from the risk factors as previously disclosed in our
Annual Report on Form 10-K for the year ended December 31, 2008.
Item 6. Exhibits.
The following exhibits are included as part of this filing and incorporated herein by this
reference:
|
|
|
|
|
|
3.1 |
|
|
Certificate of Incorporation of Registrant. (Incorporated by
reference to Exhibit 3.1 to Form 8-B filed on August 16, 1993, and
the amendment thereto, filed on Form 8-B/A on February 4, 1994.) |
|
|
|
|
|
|
3.2 |
|
|
Amendment to Certificate of Incorporation filed on May 23, 1995.
(Incorporated by reference to Exhibit 3.2 to Registrants
Registration Statement on Form S-2/A, filed on May 25, 1995.) |
|
|
|
|
|
|
3.3 |
|
|
Certificate of Designation of Rights, Preferences and Privileges of
Preferred Stock. (Incorporated by reference to Exhibit 2 to
Registrants Registration Statement on Form 8-A filed on January 8,
1996.) |
|
|
|
|
|
|
3.4 |
|
|
Certificate of Designation of the Series B Convertible Preferred
Stock, filed with the Secretary of State of Delaware on May 2, 2003.
(Incorporated by reference to Exhibit 3.1 to Registrants Current
Report on Form 8-K, filed on May 7, 2003.) |
|
|
|
|
|
|
3.5 |
|
|
Certificate of Elimination of Series A Preferred Stock filed with
the Secretary of State of Delaware on March 4, 2004. (Incorporated
reference to Exhibit 3.6 of Registrants Annual Report on Form 10-K
for the year ended December 31, 2003, filed on March 15, 2004.) |
|
|
|
|
|
|
3.6 |
|
|
Certificate of Elimination of Series B Preferred Stock filed with
the Secretary of State of Delaware on June 9, 2006. (Incorporated
reference to Exhibit 3.1 of Registrants Current Report on Form 8-K,
filed on June 9, 2006.) |
|
|
|
|
|
|
3.7 |
|
|
Certificate of Amendment of Certificate of Incorporation filed with
Secretary of State of Delaware on May 19, 2004. (Incorporated by
reference to Exhibit 3.1 of the Registrants Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2004, filed on
August 5, 2004.) |
|
|
|
|
|
|
3.8 |
|
|
Certificate of Amendment of Certificate of Incorporation filed with
Secretary of State of Delaware on May 17, 2005. (Incorporated by
reference to Exhibit 3.1 of the Registrants Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2005, filed on
August 1, 2005.) |
|
|
|
|
|
|
3.8 |
|
|
Certificate of Elimination of Series B Preferred Stock filed with
the Secretary of State of Delaware on June 9, 2006. (Incorporated
reference to Exhibit 3.1 of Registrants Current Report on Form 8-K,
filed on June 9, 2006.) |
|
|
|
|
|
|
3.9 |
|
|
Certificate of Designations, Preferences and Rights of Series A
Preferred Stock, filed with the Secretary of State of Delaware on
December 9, 2008. (Incorporated by reference to Exhibit 3.1 of
Registrants Current Report on Form 8-K, filed on December 9, 2008.) |
|
|
|
|
|
|
3.10 |
|
|
Amended and Restated By-Laws. (Incorporated by reference to Exhibit
3.2 of Registrants Current Report on Form 8-K filed on December 1,
2006.) |
|
|
|
|
|
|
31.1 |
|
|
Certification of Principal Executive Officer filed pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 dated May 6, 2009. |
|
|
|
|
|
|
31.2 |
|
|
Certification of Principal Financial Officer filed pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 dated May 6, 2009. |
|
|
|
|
|
|
32.1 |
|
|
Certification of Principal Executive Officer filed pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 dated May 6, 2009. |
|
|
|
|
|
|
32.2 |
|
|
Certification of Principal Financial Officer filed pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 dated May 6, 2009. |
30
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.
|
|
|
|
|
|
3D Systems Corporation
|
|
|
By: |
/s/ Damon J. Gregoire
|
|
|
|
Damon J. Gregoire |
|
|
|
Vice President and Chief Financial Officer
(Principal Financial Officer)
(Duly Authorized Officer) |
|
Date: May 6, 2009
31
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
|
No. |
|
Description |
|
|
|
|
|
|
31.1 |
|
|
Certification of Principal Executive Officer filed pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 dated May 6, 2009. |
|
|
|
|
|
|
31.2 |
|
|
Certification of Principal Financial Officer filed pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 dated May 6, 2009. |
|
|
|
|
|
|
32.1 |
|
|
Certification of Principal Executive Officer filed pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 dated May 6, 2009. |
|
|
|
|
|
|
32.2 |
|
|
Certification of Principal Financial Officer filed pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 dated May 6, 2009. |
32