3D Systems Announces Financial Results.Reports 4th Quarter and Full-Year 2006 Results ROCK HILL, S.C. -- 3D Systems Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : TDSC TDSC Thai Development Support Committee TDSC Time Domain Signal Coding TDSC Test Driver System - Charlie TDSC Time-Domain Spreading Code ), a leading provider of 3-D Modeling, Rapid Prototyping Building a part one layer at a time using a method of additive fabrication such as 3D printing. Such parts are used for concept modeling to determine if the product design meets the customer's expectations. and Manufacturing solutions, announced today operating results for its fourth quarter and year ended December 31, 2006. The company's reported fourth quarter results were in line with previously announced expectations. For a more detailed review of the company's operating results and financial condition, please read the managements' discussion and analysis in the company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2006, which was filed with the SEC today . Operating Results The fourth quarter results were as follows: * Revenue fell to $42.6 million from $44.0 million in the 2005 quarter, as restated, with $5 million of backlog at the end of 2006. * Operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. was $5.3 million for the fourth quarter compared to $4.2 million of operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. in the 2005 quarter, as restated. * Net loss available to common stockholders was $6.0 million compared to $5.9 million of net income available to common stockholders in the 2005 quarter, as restated. * Loss per share was $0.31 on a fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis compared to $0.32 per share of net income on a fully diluted basis in the 2005 quarter, as restated. For the full year, the company reported: * Revenue fell to $134.8 million from $139.1 million in 2005, as restated. * Revenue from materials increased to $52.1 million compared to $44.6 million in 2005, as restated. * Revenue from systems and other products decreased to $46.5 million in 2006 from $55.1 million in 2005, as restated. * Revenue from services decreased to $36.3 million from $39.3 million in 2005, as restated. * Operating loss was $25.7 million compared to $8.4 million of operating income in 2005, as restated. * Net loss available to common stockholders was $30.7 million for 2006 compared to $7.7 million of net income available to common stockholders in 2005, as restated. * Loss per share was $1.77 on a fully diluted basis compared to $0.48 per share of net income on a fully diluted basis in 2005, as restated. Net losses in the 2006 periods included $2.5 million of non-cash income tax expense arising out of the recording of a valuation allowance during 2006, reversing, as a result of the company's changed outlook, the non-cash benefit of the net deferred income tax asset that the company recorded at December 31, 2005. "I am very pleased at long last to be able to share with you our 2006 financial results. I am very disappointed that it has taken us so long to do so," said Abe Reichental, 3D Systems' president and chief executive officer. Rest assured that we are working very hard to return to timely reporting of our operating results. "As I have shared with you frequently throughout the past six months, last year was a very difficult and challenging year for us. As you know, during 2006, we executed a series of critical infrastructure and strategic projects, including the implementation of our new ERP (Enterprise Resource Planning) An integrated information system that serves all departments within an enterprise. Evolving out of the manufacturing industry, ERP implies the use of packaged software rather than proprietary software written by or for one customer. system and our relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. to Rock Hill," continued Reichental. "Although there is never a perfect time to embark on Verb 1. embark on - get off the ground; "Who started this company?"; "We embarked on an exciting enterprise"; "I start my day with a good breakfast"; "We began the new semester"; "The afternoon session begins at 4 PM"; "The blood shed started when the partisans such a major business transformation, after extensive planning, we decided to make 2006 the year in which we would invest heavily in our company to give us the systems, facilities and products necessary to scale up and achieve the kind of sustained profitable growth to which we aspire as·pire intr.v. as·pired, as·pir·ing, as·pires 1. To have a great ambition or ultimate goal; desire strongly: aspired to stardom. 2. ." While the company experienced sequential improvements in its revenue during the third and fourth quarters of 2006, the revenue decreases for both the fourth quarter and the full year 2006 reflected the effects of the disruptions that it experienced beginning in the second quarter of 2006 from the execution of its infrastructure and strategic initiatives, including the implementation of its new ERP system, the outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. of warehousing and logistics functions, new systems' stability issues, special customer accommodations, the relocation to Rock Hill and the costs incurred from its financial restatements. The 2006 revenue decline also reflects the company's strategy of discontinuing the sale of certain legacy systems in favor of its newer manufacturing-capable systems, which are equipped with integrated materials cartridges
Revenue increased by 35% over the company's third-quarter 2006 revenue, continuing the sequential-quarter recovery that began in the third quarter of 2006 and reflecting the early impact of the corrective action A corrective action is a change implemented to address a weakness identified in a management system. Normally corrective actions are instigated in response to a customer complaint, abnormal levels if internal nonconformity, nonconformities identified during an internal audit or plan that the company began to implement in July 2006. Beyond their effect on consolidated revenue in 2006, these disruptions, initiatives, stability issues and resulting customer accommodations adversely affected the company's operating performance beginning in the second quarter of 2006, and many of them continued to have some adverse effect on its operations in the third and fourth quarters of 2006. The adverse effect of these factors eased toward the end of the third quarter of 2006 and that easing continued in the fourth quarter of 2006 as the company made progress in its remediation efforts and corrective action plan. The company believes that as it exited 2006 it has regained operational stability and incurred most of the costs associated with the above-mentioned disruptions. [TABLE OMITTED] "Revenue from sales of our engineered materials and composites continued to increase at a double-digit rate in 2006 while we continued to experience a decrease in revenue from legacy products and services," commented Reichental. "We also ended 2006 with a $5 million order backlog, primarily for systems and materials. I believe that these combined results reflect the operational recovery we have been making and more importantly the continued strong demand for our products, demonstrating that the strategic actions that we have taken in the past few years to transform our product portfolio and re-engineer our business model are taking effect." [TABLE OMITTED] The $4.3 million decrease in consolidated revenue in 2006 compared to 2005 was primarily due to the disruptions and challenges mentioned above. Reflecting the early success of its portfolio transformation strategy, revenue from materials increased by $7.5 million in 2006 primarily from higher unit volume and favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. price and mix effects. While revenue from systems and services declined by $11.6 million, sales of new products and services introduced since the latter part of 2003 increased by $7.0 million during 2006 to $49.2 million, representing more than 36% of revenue for the year. "Notwithstanding the enormous challenges we encountered during 2006, we managed to deliver encouraging results," said Reichental. "Despite all of the disruptions, our materials' revenue increased some 17% over 2005 and at the end of 2006 represented some 39% of our annual revenue. We believe that the increased demand for our materials, even during this challenging period, is an early indication that our overall product portfolio transformation strategy is working. "Our growing installed base, coupled with the integration of our new systems with proprietary materials cartridges and our continuum of expert solutions, should improve the profitability of our business as revenue from materials continues to outpace out·pace tr.v. out·paced, out·pac·ing, out·pac·es To surpass or outdo (another), as in speed, growth, or performance. outpace Verb [-pacing, our growth in systems. Accordingly, the stability of our revenue base should improve as consumables' sales rise as a percentage of the product mix relative to systems," continued Reichental. Gross profit for the fourth quarter of 2006 declined to $16.1 million from $20.5 million in the fourth quarter of 2005, as restated, and declined to $46.3 million from $62.2 million for the full year of 2005, as restated. These declines in gross profit were due primarily to the combined effects of lower revenue and the ERP system, supply chain and logistics disruptions that the company encountered. Residual special accommodations extended to certain customers as a result of the operating disruptions mentioned above continued to adversely affect gross profit in the fourth quarter. The impact of equipment stability and related resource training constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. eased toward the end of the fourth quarter of 2006, as the company made significant progress in its training and quality remediation efforts and corrective action plan. The company believes that its progress in remediating its new systems' teething teething /teeth·ing/ (teth´ing) the entire process resulting in eruption of the teeth. teeth·ing n. The eruption or cutting of the teeth. problems and training gaps resulted in greater market acceptance of its new systems as reflected in its backlog at the end of the fourth quarter. [TABLE OMITTED] Gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. on products decreased to 44% of consolidated product revenue in the fourth quarter of 2006 from 51% for the fourth quarter of 2005, as restated. Gross profit margin on products decreased to 40% of consolidated product revenue in 2006 from 50% in 2005, as restated. The decrease in margins was due primarily to the combined effects of lower revenue and the disruptions mentioned above. Gross profit margin on services decreased to 19% of consolidated service revenue for the fourth quarter of 2006 from 31% of consolidated service revenue for the fourth quarter of 2005, as restated. Gross profit margin on services decreased to 19% of consolidated service revenue for the full year of 2006 from 32% of consolidated service revenue for the full year of 2005, as restated. Service margins in 2006 were adversely affected by disruptions in product availability, reduced sales volume of systems and temporarily increased installation costs. Service margins also suffered as a result of the company's decision earlier in 2006 to discontinue dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: servicing certain of its legacy systems and to cease selling certain upgrades to extend the use of legacy systems. "Regretfully re·gret·ful adj. Full of regret; sorrowful or sorry. re·gret  ful·ly adv.re·gret , implementation of our significant initiatives resulted in the temporary disruptions discussed above adversely affecting our ability to adequately support our customers. We believed that we had all the required resources in place to complete these activities smoothly. Clearly, in hindsight hind·sight n. 1. Perception of the significance and nature of events after they have occurred. 2. The rear sight of a firearm. we did not," added Reichental. "However, I am pleased to share with you that I believe we are transitioning to a point where our recent choices and their resulting new products and capabilities are now being validated by the very same customers who already are beginning to experience the difference and are responding favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. to our new products." [TABLE OMITTED] Total operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. increased by $5.1 million to $21.4 million in the fourth quarter of 2006 compared to $16.3 million in the fourth quarter of 2005, as restated, and by $18.2 million to $71.9 million in the full year of 2006 compared to $53.7 million in the full year of 2005, as restated. The increase in operating expenses for the full year was due primarily to $10.9 million of higher selling, general and administrative expenses, $5.4 million of higher severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). costs related to the relocation of the company's headquarters to Rock Hill, South Carolina Rock Hill is the largest city in York County, South Carolina, and a satellite city of Charlotte, North Carolina. The population was 49,765 at the 2000 census. According to 2006 estimates, the city has a population of 61,620 , making it the fourth largest city in South Carolina. , which were generally in line with the company's previously announced expectations, and $1.9 million of higher research and development expenses. As the company previously disclosed, the higher research and development expenses in each period related to the company's continuing high level of new product development work, primarily related to its accelerated work on the development of additional desktop 3-D Modelers, including the recently announced V-Flash[TM] Desktop Modeler, and other Rapid Manufacturing Building parts out of plastic or metal one layer at a time using a method of additive fabrication such as 3D printing. Multiple pieces, either similar or dissimilar, can be built simultaneously. solutions as well as its previously announced research and development agreement with Symyx Technologies Symyx Technologies NASDAQ: SMMX is a pioneer in the area of combinatorial chemistry applied to heterogeneous catalysis and homogeneous catalysis, polymer formulations, electronic and magnetic materials. , Inc. The severance and restructuring costs related to the relocation of the company's headquarters to Rock Hill constituted approximately one third of the increase in operating expenses in 2006. The higher selling, general and administrative expenses in 2006 resulted mostly from higher consulting expenses primarily related to the company's ERP system and relocation projects and its higher accounting fees and internal expenses related to its restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. activities, higher bad debt expense, higher depreciation and amortization expense, non-cash equity compensation expense related to unvested options and stock-based compensation expense relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc previously granted stock options. "During 2006, we continued to fund infrastructure investments as well as the abnormal costs we incurred in connection with remedying the disruptions we incurred and our restatement activities. We ended the year with $14.3 million of unrestricted cash, of which $8.2 million was drawn against our bank credit facility that comes due at the beginning of July 2007, and we expect to begin work on renewing or replacing that facility shortly. Our year-end cash position reflects in part our continued efforts to improve our working capital management, which included a further reduction in our days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). in the fourth quarter of 2006," said Reichental. "Notwithstanding all of the challenges we experienced in 2006, we reflect on the year with mixed emotions -- pride for our overall achievements and for the strong momentum with which we ended the year, and disappointment for the operating losses and the unintended consequences For the "Law of unintended consequences", see Unintended consequence Unintended Consequences is a novel by author John Ross, first published in 1996 by Accurate Press. leading to restatements of our financials. I firmly believe that by taking the bold and difficult steps we executed during this past year, we are well positioned for the future," added Reichental. "Despite the disappointments that we encountered in 2006, we managed to make significant progress in many areas as we continued to invest in infrastructure, products, people and capabilities to achieve our strategic objectives. Specifically, since the beginning of 2006: * We stabilized sta·bi·lize v. sta·bi·lized, sta·bi·liz·ing, sta·bi·liz·es v.tr. 1. To make stable or steadfast. 2. and enhanced the performance of our Viper[TM] Pro SLA (1) (StereoLithography Apparatus) See 3D printing. (2) (Service Level Agreement) A contract between the provider and the user that specifies the level of service expected during its term. ([R]) and Sinterstation([R]) Pro SLS (Selective Laser Sintering) See laser sintering and 3D printing. ([R]) Systems, two significant, new-from-the-ground-up Rapid Manufacturing solutions. * We introduced an integrated digital dentistry dentistry, treatment and care of the teeth and associated oral structures. Dentistry is mainly concerned with tooth decay, disease of the supporting structures, such as the gums, and faulty positioning of the teeth. 3-D Modeling System, the InVision([R]) Dental Pro (DP). * We introduced several revolutionary engineered materials and composites. * We continued outsourcing non-core activities such as spare parts' distribution, resulting in improved next-day service to our customers. * We continued pruning pruning, the horticultural practice of cutting away an unwanted, unnecessary, or undesirable plant part, used most often on trees, shrubs, hedges, and woody vines. our older products, including curtailing development and sale of upgrades to legacy systems. * We expanded our network of systems' outsourcing partners and suppliers to include materials and service providers. * We broadened our strategic alliances with several key industry players and research universities globally. * We invested heavily in strategic and tactical R&D -- increasing R&D costs to approximately $14.1 million -- as part of our commitment to improve overall customer success. * We consolidated our corporate headquarters into a new facility in Rock Hill, S.C., to enhance our effectiveness and customer responsiveness and to reduce overall costs. * We created a state-of-the-art Rapid Manufacturing Center (RMC RMC Royal Military College RMC Radio Monte Carlo RMC Randolph-Macon College (Ashland, Virginia) RMC Regional Medical Center RMC Robert Morris College (Illinois) RMC Rocky Mountain College ) to showcase our product line and an advanced research and development center. * We completed the development of our world-class 3D Systems University in partnership with York Technical College to provide training to our customers, resellers and employees. * We implemented a new ERP system in order to streamline our operations, enhance customer service and provide more timely and effective management information. * We stepped up remediation efforts to achieve effective controls across all functions and geographies in which we operate. "As we look ahead, we are confident in the fundamentals of our business model and in our strengthening industry leadership position through even stronger and more comprehensive technological leadership. Our transformed business model, renewed organizational strength and expanded global presence underscore The underscore character (_) is often used to make file, field and variable names more readable when blank spaces are not allowed. For example, NOVEL_1A.DOC, FIRST_NAME and Start_Routine. (character) underscore - _, ASCII 95. our strong commitment to improve our customers' success. We believe that the majority of our operational issues have been resolved successfully. We remain confident in our overall direction and expect that the key initiatives and investments that we undertook throughout 2006 will provide us with the right platform to achieve our long-term objectives," concluded Reichental. Conference Call and Audio Webcast Details 3D Systems will hold a conference call and audio Webcast to discuss its fourth quarter and full year 2006 financial results tomorrow morning, Tuesday, May 1, at 8:30 a.m. Eastern Time. * To access the Conference Call, dial 1-888-336-3485 (or 706-634-0653 from outside the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ). A recording will be available two hours after completion of the call for three days. To access the recording, dial 1-800-642-1687 (or 706-645-9291 from outside the United States) and enter 7803123, the conference call ID number. * To access the audio Webcast, log onto 3D Systems' website at www.3dsystems.com. The link to the Webcast is provided on the homepage of the website. To ensure timely participation and technical capability, we recommend logging on a few minutes prior to the conference call to activate your participation. The Webcast will be available for replay beginning approximately 48 hours after completion of the call at: www.3dsystems.com under the Investor Relations' section. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Certain statements made in this release that are not statements of historical or current facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company 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 the conditional or future tenses future tense n. A verb tense expressing future time. Noun 1. future tense - a verb tense that expresses actions or states in the future future or that include terms such as "believes," "belief," "expects," "estimates," "intends," "anticipates" or "plans" to be uncertain and forward-looking. Forward-looking statements may include comments as to the company's beliefs and expectations as to future events and trends affecting its business and expectations, including matters relating to the proposed restatements of the company's financial statements and related matters described herein, and are necessarily subject to uncertainties, many of which are outside the control of the company. The factors described under the headings "Forward-Looking Statements," "Cautionary Statements and Risk Factors," and "Risk Factors" in the company's periodic filings with the Securities and Exchange Commission, as well as other factors, could cause actual results to differ materially from those reflected or predicted in forward-looking statements. About 3D Systems Corporation 3D Systems is a leading provider of 3-D Modeling, Rapid Prototyping and Manufacturing solutions. Its systems and materials reduce the time and cost of designing products and facilitate direct and indirect manufacturing by creating actual parts directly from digital input. These solutions are used for design communication and prototyping as well as for production of functional end-use parts: Transform your products. More information on the company is available at www.3dsystems.com, or via email at moreinfo@3dsystems.com. # # # Tables Follow [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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