3D earnings flounder as lawsuits distract managers. (Corporate Focus).3D Systems Corp. built its business offering manufacturers ways to make three-dimensional models and prototypes quickly and inexpensively. A financial model for the Valencia-based company is proving to be somewhat more elusive. Despite several recent acquisitions to bolster its product offerings and technical expertise, 3D's earnings have slipped and its revenue growth has stalled. Like many companies whose fortunes are tied to industrial and corporate growth, 3D has been hit by a virtual shutdown shut·down n. A cessation of operations or activity, as at a factory. shutdown Noun the closing of a factory, shop, or other business Verb shut down in capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. across every industry sector. The company has also been embroiled em·broil tr.v. em·broiled, em·broil·ing, em·broils 1. To involve in argument, contention, or hostile actions: "Avoid . . . in several lawsuits that drained management resources and curtailed growth. These factors came to bear in the first quarter of 2002. Excluding the proceeds of a legal settlement and without benefit of an acquisition made last year, 3D would have reported a loss of $3.5 million or $.27 per 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. share and a 28-percent decline in revenues for its most recent quarter ended March 31. 3D heralded the problems early in April, revising its first-quarter guidance downward, a move that led A.G. Edwards & Sons Inc. to downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. the company's stock to a "sell." "We are not pleased with first-quarter results," said Brian K. Service, president and chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. of 3D, in announcing first-quarter results. (3D executives declined to comment for this story.) "We are in the process of recalibrating our cost structure in line with current market conditions, including a reduction of approximately 10 percent of our work force." As of the end of 2001, 3D employed 580 workers. For the first quarter of 2002, 3D reported net income of $8.5 million or $.58 per diluted share on revenues of $27.2 million. That compares with earnings of $1.4 million or $. 11 per share on revenues of $27.9 million in the comparable period last year. But the results include a pre-tax benefit of $18.5 million due to the settlement of a claim with a former business affiliate. The company's revenues, too, would have shown a decline if not for the contribution of DTM DTM dermatophyte test medium. Corp., a company acquired in August 2001. "The majority of the products the company sells are capital equipment and, post-Sept. 11, capital spending plans were largely put on hold," said Jay R. Harris, a security analyst and president of Goldsmith & Harris in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . "What you saw in the first quarter was the consequence of that kind of corporate-America, corporate-Europe decision-making process." Founded in 1986, 3D makes solid imaging products and systems used to create prototypes and concept models. Its systems, allowing manufacturers to "print" three-dimensional models directly from computer-assisted designs, eliminate the need for tooling, shortening the length of time it takes to bring a product to market and reducing the expense. Whereas injection molding injection molding n. A manufacturing process for forming objects, as of plastic or metal, by heating the molding material to a fluid state and injecting it into a mold. and other traditional techniques can be amortized over long periods of production and sales, 3D's systems, ranging from $50,000 to $800,000, have had particular appeal in lower volume productions when designs are likely to change every few years. And 3D, which saw revenues grow to more than $120 million from about $90.3 million in 1997, has carved out the No. 1 position in its niche. But last year, the company attracted the interest of the Justice Department when it announced plans to acquire DTM, a $45 million maker of three-dimensional prototypes using laser technology. The DOJ (Department Of Justice) The legal arm of the U.S. government that represents the public interest of the United States. It is headed by the Attorney General. challenged the acquisition, and 3D executives were engaged in defending their merger until a resolution was reached in February. About the same time, a decision by 3D to terminate a development agreement with Vantico he. led to a challenge that was not settled until March. "A lot of senior people and marketing managers spent long hours testifying before the Justice Department," said Harris, "and they basically lost control of the marketplace." In recent months, 3D's stock price has fallen into the $13 range from a 52-week high of $18.52. On Friday, May 24, the stock closed at $13.11 [GRAPH OMITTED] [GRAPH OMITTED] 3D Systems Corp. YEAR (Dec. 31) 2001 2000 Revenues (millions) $121.2 $109.7 Operating Expenses (millions) 54.5 40.5 Cost of Sales (millions) 67.8 56.8 Operating Income (Loss (million) (1.1) 12.3 Net Income (Loss) (millions) (1.3) 8.1 Earnings (Loss) Per Share ($0.11) $0.63 SUMMARY Business: Solid imaging systems Headquarters: Valencia CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. : Brian K. Service Market Cap: $190.4 million Dividend Yield: NA * Total Liabilities: $86.3 million P/E P/E See: Price/earnings ratio : 38.0 Long-Term Debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. : $25.6 million * 3D does not pay dividends |
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