SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 28, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-22250
3D SYSTEMS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 95-4431352
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) (Identification No.)
26081 AVENUE HALL, VALENCIA, CALIFORNIA 91355
(Address of Principal Executive Offices) (Zip Code)
(805) 295-5600
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such report(s), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No_____
Shares of Common Stock, par value $0.001, outstanding as of April 30 , 1997:
11,361,124 shares
3D SYSTEMS CORPORATION
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION Number
------
ITEM 1. Financial Statements
Consolidated Balance Sheets,
December 31, 1996 and March 28, 1997. . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations
For the Three Month Periods Ended
March 29, 1996 and March 28, 1997 . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows
for the Three Month Periods Ended
March 29, 1996 and March 28, 1997 . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements,
December 31, 1996 and March 28, 1997. . . . . . . . . . . . . . . . 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . .14
Page 2 of 15
3D SYSTEMS CORPORATION
- - Consolidated Balance Sheets
(Unaudited)
ASSETS December 31, 1996 March 28, 1997
----------------- --------------
Current assets:
Cash and cash equivalents $24,356,441 $22,385,070
Restricted cash 722,000 655,000
Short-term investments 3,759,492 1,753,975
Accounts receivable, less allowances for
doubtful accounts of $406,178 (1996) and $291,841 (1997) 19,601,383 19,400,170
Current portion of lease receivables 987,362 1,532,646
Inventories 12,309,588 14,257,187
Deferred tax assets 2,958,227 2,764,512
Prepaid expenses and other current assets 2,332,337 2,046,611
---------- -----------
Total current assets 67,026,830 64,795,171
Property and equipment, net 14,452,504 15,261,241
Licenses and patent costs, net 3,660,568 3,565,204
Deferred tax assets 1,821,000 1,821,000
Lease receivables, less current portion 3,773,573 6,326,568
Other assets 1,504,382 1,520,356
---------- -----------
$92,238,857 $93,289,540
---------- -----------
---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,805,930 $ 4,992,360
Accrued liabilities 6,890,343 5,938,670
Current portion of long-term debt 100,000 95,000
Customer deposits 894,111 898,777
Deferred revenues 5,572,892 6,939,217
---------- -----------
Total current liabilities 17,263,276 18,864,024
Other liabilities 1,472,991 1,434,010
Long-term debt, less current portion 4,800,000 4,750,000
---------- -----------
23,536,267 25,048,034
---------- -----------
Stockholders' equity:
Preferred stock, $.001 par value. Authorized 5,000,000
shares; none issued
Common stock, $.001 par value. Authorized 25,000,000
shares; issued and outstanding 11,358,892 (1996)
and 11,361,124 (1997) 11,359 11,361
Capital in excess of par value 72,527,768 72,540,271
Retained earnings (deficit) (4,308,471) (3,920,925)
Cumulative translation adjustment 471,934 (389,201)
---------- -----------
Total stockholders' equity 68,702,590 68,241,506
---------- -----------
$92,238,857 $93,289,540
---------- -----------
---------- -----------
See accompanying notes to consolidated financial statements.
Page 3 of 15
3D SYSTEMS CORPORATION
Consolidated Statements of Operations
(Unaudited)
Three Month Periods Ended
----------------------------------
March 29, 1996 March 28, 1997
-------------- --------------
Sales:
Products $13,676,883 $13,597,856
Services 5,489,681 7,860,956
------------ ------------
Total sales 19,166,564 21,458,812
------------ ------------
Cost of sales:
Products 6,164,205 7,287,392
Services 3,490,589 5,502,589
------------ ------------
Total cost of sales 9,654,794 12,789,981
------------ ------------
Gross profit 9,511,770 8,668,831
------------ ------------
Operating expenses:
Selling, general and administrative 6,202,019 6,390,691
Research and development 1,825,750 1,929,834
------------ ------------
Total operating expenses 8,027,769 8,320,525
------------ ------------
Income from operations 1,484,001 348,306
Interest income 455,517 351,048
Interest expense (6,340) (58,783)
------------ ------------
Income before provision for income taxes 1,933,178 640,571
Provision for income taxes 811,935 253,025
------------ ------------
Net income $ 1,121,243 $ 387,546
------------ ------------
------------ ------------
Net income per share $ .10 $ .03
------------ ------------
------------ ------------
Weighted average number of common and common
equivalent shares outstanding during the period 11,776,743 11,757,504
------------ ------------
------------ ------------
See accompanying notes to consolidated financial statements.
Page 4 of 15
3D SYSTEMS CORPORATION
Consolidated Statements of Cash flows
For the Three Month Periods Ended March 29, 1996 and March 28, 1997
(Unaudited)
1996 1997
------------- -------------
Cash flows from operating activities:
Net income $ 1,121,243 $ 387,546
Adjustments to reconcile net income to net cash
used for operating activities:
Deferred income taxes 775,000 388,550
Depreciation of property and equipment 442,348 839,203
Amortization of licenses and patent costs 157,915 167,810
Amortization of software development costs 115,506 123,460
Changes in operating assets and liabilities:
Accounts receivable 570,901 (336,661)
Lease receivables --- (3,098,279)
Inventories (1,716,695) (2,311,301)
Prepaid expenses and other current assets (45,649) 248,511
Other assets (177,395) (163,541)
Accounts payable (1,667,733) 1,980,019
Accrued liabilities (759,549) (908,777)
Customer deposits (196,801) 4,666
Deferred revenues 341,422 1,428,224
Other liabilities (34,278) (61,517)
------------ ------------
Net cash used for operating activities (1,073,765) (1,312,087)
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (3,447,462) (2,029,482)
Disposition of property and equipment 215,541 407,581
Increase in licenses and patent costs (50,000) (60,793)
Proceeds of short term investment --- 2,005,517
------------ ------------
Net cash provided by (used for) investing activities (3,281,921) 322,823
------------ ------------
Cash flows from financing activities:
Exercise of stock options and warrants 111,861 12,505
Payment of long term debt --- (55,000)
------------ ------------
Net cash provided by (used for) financing activities 111,861 (42,495)
Effect of exchange rate changes on cash (104,864) (939,612)
------------ ------------
Net decrease in cash and cash equivalents (4,348,689) (1,971,371)
Cash and cash equivalents at the beginning of the period 38,258,927 24,356,441
------------ ------------
Cash and cash equivalents at the end of the period $33,910,238 $22,385,070
------------ ------------
------------ ------------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 3,067 $ 58,783
------------ ------------
------------ ------------
Income taxes $ 387,423 $ 233,718
------------ ------------
------------ ------------
See accompanying notes to consolidated financial statements
Page 5 of 15
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements
December 31, 1996 and March 28, 1997
(Unaudited)
(1) Basis of Presentation.
The accompanying unaudited consolidated financial statements of 3D Systems
Corporation and subsidiaries (the Company) are prepared in accordance with
instructions to Form 10-Q and, in the opinion of management include all
material adjustments (consisting only of normal recurring accruals) which
are necessary for the fair presentation of results for the interim periods.
The Company reports its interim financial information on a 13 week basis
ending the last Friday of each quarter, and reports its annual financial
information through the calendar year ended December 31. These unaudited
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
The results of the three month period ended March 28, 1997 are not
necessarily indicative of the results to be expected for the full year.
(2) Inventories.
December 31, 1996 March 28, 1997
----------------- --------------
Raw materials $ 4,517,981 $ 5,674,653
Work in progress 1,226,627 1,775,062
Finished goods 6,564,980 6,807,472
----------- -----------
$12,309,588 $14,257,187
----------- -----------
----------- -----------
(3) Property and Equipment.
December 31, 1996 March 28, 1997
----------------- --------------
Land and building $ 4,613,051 $ 4,613,051
Machinery and equipment 12,477,147 12,928,713
Office furniture and equipment 2,302,613 2,323,251
Leasehold improvements 1,809,169 1,895,089
Rental equipment 676,669 760,421
Construction in progress 461,010 894,664
----------- -----------
22,339,659 23,415,189
Less accumulated depreciation and
amortization (7,887,155) (8,153,948)
----------- -----------
$14,452,504 $15,261,241
----------- -----------
----------- -----------
Page 6 of 15
3D SYSTEMS CORPORATION
Notes to Consolidated Financial Statements (Continued)
December 31, 1996 and March 28, 1997
(Unaudited)
(4) Statement of Financial Accounting Standards Not Yet Adopted.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings
per Share." This statement requires dual presentation of newly defined
basic and diluted earnings per share ("EPS") on the face of the income
statement for all entities with complex capital structures. The accounting
standard is effective for fiscal years ending December 15, 1997 and
requires restatement of all prior period EPS data presented. Earlier
application is not permitted. However, disclosure of pro forma EPS amounts
computed using SFAS No. 128 in the notes to the financial statements is
permitted in the periods prior to required adoption. Accordingly the pro
forma EPS data for the three months ended March 29, 1996 and March 28, 1997
is as follows (shares in thousands):
Three Months Ended
March 29, 1996 March 28, 1997
-------------- --------------
Shares EPS Shares EPS
-------------- --------------
Basic EPS 11,287 $ 0.10 11,360 $ 0.03
Diluted EPS 11,777 0.10 11,758 0.03
(5) Subsequent Events.
(a) On April 18, 1997, the Company announced certain management
and other personnel changes. The Company appointed Dr. Richard
Balanson, President and Chief Operating Officer and a director of
the Company, moved to restructure the senior staff and implemented
a modest reduction in force involving approximately five percent of
the domestic workforce, primarily at corporate headquarters. In
connection with the management restructuring and reduction in
force, the Company expects to record non-recurring pre-tax expenses
in the second quarter approximating $500,000 related to severence
benefits.
(b) On May 6, 1997, the Company announced that its board of directors
authorized the Company to buy up to 1.5 million of its shares in the
open market and through private transactions. The actual number of
shares repurchased, and the timing of the purchases, will be based
on the Company's stock price, general conditions and other factors.
The repurchased shares will be available for issuance when
outstanding stock options are exercised.
Page 7 of 15
3D SYSTEMS CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion contains trend analysis and other forward looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended and Section 21A of the Securities Act of 1933, as amended.
Actual results could differ from those projected in the forward looking
statements as a result of the cautionary statements and risk factors set forth
below and in Item 1 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
RESULTS OF OPERATIONS
The Company's revenues are generated by product and service sales. Product
sales are comprised of the sale of Stereolithography Apparatus (SLA) systems and
related equipment, Actua 2100's, resins, software, and other component parts, as
well as rentals of SLA systems. Service sales include revenues from
maintenance, services provided by the Company's Technology Centers, and customer
training.
The following table sets forth certain operating amounts and ratios as a
percentage of total sales except as otherwise
indicated:
Three Month Periods Ended
---------------------------------
March 29, 1996 March 28, 1997
--------------- ---------------
(in thousands except percent data)
Sales:
Products $13,676,883 $13,597,856
Services 5,489,681 7,860,956
----------- -----------
Total sales 19,166,564 21,458,812
----------- -----------
Cost of sales:
Products 6,164,205 7,287,392
Services 3,490,589 5,502,589
----------- -----------
Total cost of sales 9,654,794 12,789,981
----------- -----------
Total gross profit 9,511,770 8,668,831
% of total sales 49.6% 40.4%
Gross profit - products 7,512,678 6,310,464
% of total product sales 54.9% 46.4%
Gross profit - services 1,999,092 2,358,367
% of total service sales 36.4% 30.0%
Selling, general and administrative
expenses 6,202,019 6,390,691
% of total sales 32.4% 29.8%
Research and development expenses 1,825,750 1,929,834
% of total sales 9.5% 9.0%
----------- -----------
Income from operations 1,484,001 348,306
% of total sales 7.7% 1.6%
Interest income, net 449,177 292,265
% of total sales 2.3% 1.4%
Provision for income taxes 811,935 253,025
% of total sales 4.2% 1.2%
----------- -----------
Net income 1,121,243 387,546
% of total sales 5.8% 1.8%
----------- -----------
----------- -----------
Page 8 of 15
3D SYSTEMS CORPORATION
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
The following table sets forth for the periods indicated total revenues
attributable to each of the Company's major products and services groups, and
those revenues as a percentage of total sales:
Three Month Periods Ended
----------------------------------
March 29, 1996 March 28, 1997
-------------- --------------
Products:
SLA and Actua systems and related equipment $ 9,432,616 $ 9,814,304
Resins 2,625,276 2,818,544
Software, other components parts and rentals 1,618,991 965,008
----------- -----------
Total products 13,676,883 13,597,856
----------- -----------
Services:
Maintenance 4,151,792 6,267,307
Technology Centers 1,128,082 1,341,835
Training 209,807 251,814
----------- -----------
Total services 5,489,681 7,860,956
----------- -----------
Total sales $19,166,564 $21,458,812
----------- -----------
----------- -----------
Products:
SLA and Actua systems and related equipment 49.2% 45.8%
Resins 13.7 13.1
Software, other components parts
and rentals 8.4 4.5
----------- -----------
Total products 71.3 63.4
----------- -----------
Services:
Maintenance 21.7 29.2
Technology 5.9 6.2
Training 1.1 1.2
----------- -----------
Total services 28.7 36.6
----------- -----------
Total sales 100.0% 100.0%
----------- -----------
----------- -----------
Page 9 of 15
3D SYSTEMS CORPORATION
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
THREE MONTH PERIOD ENDED MARCH 28, 1997 COMPARED TO THE THREE MONTH PERIOD ENDED
MARCH 29, 1996.
SALES. Sales during the three month period ended March 28, 1997 (the "first
quarter of 1997") were $21.5 million, an increase of 12% over the $19.2 million
recorded during the three month period ended March 29, 1996 (the "first quarter
of 1996").
Product sales during the first quarter of 1997 ($13.6 million) were slightly
lower than the first quarter of 1996 ($13.7 million). The Company sold a total
of 33 SLA systems in the first quarter of 1997. During the first quarter of
1996, the Company sold 40 SLAs. The decrease in SLA sales were partially
offset, however, by the sale of 33 Actua 2100's, the Company's low-priced office
modeler (which uses a technology completely different from stereolithography),
designed for operation in engineering and design offices.
Orders for the Company's SLA systems in the first quarter of 1997 (compared to
the first quarter of 1996) increased in Europe but declined in both the U.S. and
Asia-Pacific markets and total SLA backlog at the end of the first quarter of
1997 was substantially lower than the end of the first quarter of 1996. The
Company believes that the decline in U.S. orders in the first quarter of 1997
(when compared to the first quarter of 1996) was due primarily to the
performance and termination of a number of the Company's independent domestic
sales representatives ("agents") and, to a lesser extent, competitive pressures.
The Company's domestic marketing strategy had previously focused on a strong
internal sales organization, as well as the utilization of agents (primarily,
independent sales representatives in the machine tool industry). These sales
agents however did not produce the level of sales expected by the Company during
1996. Additionally, the Company believed it could obtain better visibility and
contact with its customers by utilizing a direct sales force. Accordingly, in
August 1996, the Company terminated its arrangements with all of its sales
agents and began recruiting additional personnel to strengthen its internal
sales and support organization. Between September 1, 1996 and December 31, 1996,
the Company completed the hiring of ten additional sales persons. Because of the
long cycle for SLA system sales, the Company does not anticipate that the
additions to its internal sales organization will significantly increase
domestic sales in the first half of 1997. While historically there has not
always been an accurate correlation between orders and ending backlog in one
quarter and revenues in the next quarter, the decline in U.S. SLA orders during
the first quarter of 1997, coupled with potential inefficiencies caused by the
recent changes in the domestic sales organization, may negatively impact
domestic revenues during the second quarter of 1997. The Company anticipates
that European orders should increase during 1997 as compared to 1996 primarily
as a result of an increased sales force. This is a forward looking statement
and as with other such statements is subject to uncertainties. For example,
European economic conditions could cause delays in customer orders which
could lead to orders being lower in 1997 than 1996.
The Company believes that SLA system sales may also fluctuate on a quarterly
basis as a result of a number of factors, including the status of world economic
conditions, fluctuations in foreign currency exchange rates and the timing of
product shipments (the current U.S. list price of an SLA-500, for example, is
$490,000; thus the acceleration or delay of a small number of shipments from one
quarter to another can significantly affect the results of operations for the
quarters involved).
Other factors which may impact quarterly sales during 1997 include the
introduction of two new products -- the SLA-350 Series 10, a new, advanced SLA
system and the low-priced Actua 2100 office modeler. During May 1996, the
Company began commercial shipments of the SLA-350. As a result of certain
technical issues, which the Company believes to be resolved, commercial
shipments of the Actua 2100 were delayed until late December 1996 (the Company
shipped a total of six commercial units in December 1996). The possibility
exists that the announcement and introduction of these new products may have
caused, and may cause in the future, potential customers of the Company who
were considering the purchase of one of the Company's other models to defer
their purchase decision until
Page 10 of 15
3D SYSTEMS CORPORATION
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
further information is available as to the performance and reliability of the
new products. Further delays in shipments of new products may also occur as a
result of unexpected problems encountered in actual use.
Service sales during the first quarter of 1997 increased $2.4 million or 43%
compared to the first quarter of 1996, primarily as a result of increased
maintenance revenues due to the larger installed base of SLA systems in the U.S.
and Europe.
COST OF SALES. Cost of sales increased to $12.8 million or 60% of sales in the
first quarter of 1997 from $9.7 million or 50% of sales in the first quarter of
1996.
Product cost of sales as a percentage of product sales increased to 54% during
the first quarter of 1997 compared to 45% during the first quarter of 1996. The
increase in 1997 was primarily the result of greater discounting of European SLA
system sales in 1997 due to competition; sales of the lower margin Actua 2100
office modeler; greater domestic discounting due to competitive pricing
pressures; price reductions to the SLA-250 Series 50 and Series 40 effected by
the Company in January 1997; increased manufacturing overhead as a result of the
transition of the Company's manufacturing activities from Valencia, California
to a new and larger manufacturing facility in Grand Junction, Colorado; and to a
lesser extent, the stronger U.S. dollar in the first quarter of 1997, as
compared to the first quarter of 1996. These factors were partially offset by
substantially reduced commission payments to agents as a result of the
termination of domestic sales agents described above. The Company's gross profit
margins on product sales are affected by several factors including, among
others, sales mix, distribution channels and fluctuations in foreign currency
exchange rates and, therefore, may vary in future periods from those experienced
during the first quarter of 1997. Additionally, the Company anticipates that the
gross margins related to the Actua 2100 system will be lower than margins on its
SLA systems, and, if revenues from the sales of Actua 2100 represent a material
portion of the Company's product sales, gross margins from product sales would
be reduced. The Company also anticipates that gross margins related to the
Actua 2100 will be lower during the initial phases of production as a result of
certain inefficiencies and anticipates, in the event of increased production,
that Actua 2100 gross margins could increase as a result of lower per unit
material costs (due to greater purchasing economies) and increased manufacturing
efficiencies. Additionally, the Company anticipates that gross margins relating
to the SLA 250 in 1997 will be lower than historical margins due to the
introduction in January 1997 of the SLA-250 Series 30A (an entry level SLA
priced at $99,000 with a lower margin than other SLA systems) and the
approximately 20% price reduction of the SLA-250 Series 40 and Series 50
effected by the Company in January 1997. The Company anticipates that shipments
of the SLA-250 Series 30A will commence during the second quarter of 1997.
This is a forward looking statement however and as with other such statements
is subject to uncertainties. For example, customer could elect to order other
models within the SLA-250 series product line which could delay the shipments
of the SLA-250 Series 30A.
Service cost of sales as a percentage of service sales increased to 70% during
the first quarter of 1997 compared to 64% during the first quarter of 1996,
primarily as a result of certain hardware upgrades afforded SLA-500 customers
with software maintenance contracts due to the Company's new NT version system
software and the effect of certain inefficiencies attributable to the Company's
Keltool operations which were acquired in September 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("S,G&A") expenses increased approximately $189,000 or 3% in the
first quarter of 1997 compared to the first quarter of 1996, primarily as a
result of expanded sales and marketing programs in Europe. The Company currently
anticipates that S,G&A expenses for the second quarter of 1997 will be greater
than the first quarter of 1997 primarily as a result of the impact of severance
benefits (approximately $500,000) related to a restructuring plan in April 1997
designed to reduce costs and improve operating results. The Company currently
anticipates that if its revenues continue to grow, S,G&A expenses as a
percentage of total sales in future quarters should begin to decline, primarily
as a result of economies of scale. However, these are forward looking
statements and, as with other such statements, are subject to uncertainties.
For example, if sales do not continue to grow over the period, it is less likely
that S,G&A expenses as a percentage of total sales would decline.
Page 11 of 15
3D SYSTEMS CORPORATION
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
RESEARCH AND DEVELOPMENT EXPENSES. Research and development ("R&D") expenses
during the first quarter of 1997 increased approximately $104,000 or 6% compared
to the first quarter of 1996. The increase in R&D expenses in 1997 was primarily
the result of experimental material related to certain development projects.
Based on the Company's historical expenditures related to research and
development and its current development goals, the Company anticipates for the
foreseeable future, research and development expenses will be equal to
approximately 10% of sales. However, this is a forward-looking statement and,
as with any such statement, is subject to uncertainties. For example, if total
sales of the Company for any particular period do not meet the anticipated sales
of the Company for that period, research and development expenses as a
percentage of sales may exceed 10%.
OPERATING INCOME. Operating income for the first quarter of 1997 was 1.6% of
total sales compared to 7.7% of total sales in the first quarter of 1996. The
decrease in the percentage of operating income to total sales in 1997 was
primarily attributable to the increases in cost of sales (both products and
services) in 1997, described above.
OTHER INCOME AND EXPENSES. Interest income decreased to $351,048 during the
first quarter of 1997 from $455,517 during the first quarter of 1996, primarily
as a result of the lower investment balances due to cash used for operating
activities and investment activities since the first quarter of 1996.
Interest expense increased to $58,783 during the first quarter of 1997 from
$6,340 in the first quarter of 1996 primarily as a result of the Company's
financing of its Colorado facility which was effected in August 1996.
PROVISION FOR INCOME TAXES. For the first quarter of 1997, the Company's tax
expense was $253,025 or 39.5% of pre-tax income compared to tax expense of
$811,935 or 42% of pre-tax income for the first quarter of 1996. The lower tax
rate for the first quarter of 1997 compared to the first quarter of 1996 was
primarily the result of certain tax reduction initiatives effected by the
Company during the second half of 1996. The Company's anticipated tax rate for
the remainder of 1997 is expected to approximate 39%.
LIQUIDITY AND CAPITAL RESOURCES
December 31, 1996 March 28, 1997
----------------- --------------
Cash and cash equivalents (1) $25,078,441 $23,040,070
Short-term investments 3,759,492 1,753,975
Working capital (1) 49,763,554 45,931,147
Three Month Periods Ended
--------------------------------
March 29, 1996 March 28, 1997
-------------- --------------
Cash used for operating
activities $(1,073,765) $(1,312,087)
Cash provided by (used for) investing activities (3,281,921) 322,823
Cash provided by (used for) financing
activities 111,861 (42,495)
(1) Includes $722,000 and $655,000 of restricted cash at December 31, 1996 and
March 28, 1997, respectively.
Page 12 of 15
3D SYSTEMS CORPORATION
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Net cash used for operating activities during the first quarter of 1997 was $1.3
million. The negative cash flow from operations during the first quarter of
1997, comprised primarily of an increase in lease receivables ($3.1 million), an
increase in inventory ($2.3 million) as a result of an increase in SLA finished
goods and raw materials (both Actua 2100 and SLA) and a decrease in accrued
liabilities ($908,777), was partially offset by non cash depreciation and
amortization ($1.1 million), an increase in accounts payable ($2.0 million), and
an increase in deferred revenues ($1.4 million).
Net cash provided by investing activities during the first quarter of 1997
totaled $322,823 and was primarily the result of the liquidation of short-term
investments ($2.0 million) which was substantially offset by expenditures
related to SLA equipment manufactured for use as demonstration equipment and the
purchase of computers and manufacturing equipment due to an increase in
personnel and increased production capacity.
Net cash used for financing activities during the first quarter of 1997 was
primarily the result of the Company's repayment of a portion of the principal
related to the $4.9 million tax-exempt industrial revenue development bond
financing effected in August 1996.
The Company believes that funds generated from operations, existing working
capital and its current line of credit will be sufficient to satisfy its
anticipated operating requirements for at least the next twelve months.
Page 13 of 15
3D SYSTEMS CORPORATION
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11. Computation of per share earnings.
27. Financial Data schedule.
(b) Reports on Form 8-K
None
Page 14 of 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
/s/ Edward C. Ferrier May 12, 1997
- -------------------------------- -----------
Edward C. Ferrier Date
Corporate Controller and Acting
Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
(Duly authorized to sign on behalf of Registrant)
Page 15 of 15