e10vk
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
|
|
|
þ
|
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
|
|
For the fiscal year ended
December 31,
2009
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
Commission file number
001-34220
3D SYSTEMS
CORPORATION
(Exact name of Registrant as
specified in our charter)
|
|
|
Delaware
|
|
95-4431352
|
(State or other jurisdiction
of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
333 Three D Systems Circle
Rock Hill, SC 29730
(Address of principal executive
offices and zip code)
(803) 326-3900
(Registrants telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
|
|
|
Title of Each Class
|
|
Name of Each Exchange on Which Registered
|
Common stock, par value $0.001 per share
|
|
The NASDAQ Global Market
|
Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
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 Website, 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 if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. 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):
|
|
|
|
Large
accelerated
filer o
|
Accelerated
filer þ
|
Non-accelerated
filer o
|
Smaller
reporting
company o
|
(Do not check if a smaller reporting company)
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
The aggregate market value of the registrants common stock
held by non-affiliates of the registrant on June 30, 2009
was $128,911,764. For purposes of this computation, it has been
assumed that the shares beneficially held by directors and
officers of the registrant were held by affiliates.
This assumption is not to be deemed an admission by these
persons that they are affiliates of the registrant.
The number of outstanding shares of the registrants common
stock as of February 12, 2010 was 22,860,807.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the
registrants definitive proxy statement for its 2010 Annual
Meeting of Stockholders, to be filed with the Securities and
Exchange Commission, are incorporated by reference into
Part III of this
Form 10-K.
3D
SYSTEMS CORPORATION
Annual Report on
Form 10-K
for the
Year Ended December 31, 2009
Table of Contents
1
PART I
General
3D Systems Corporation (3D Systems or the
Company) is a holding company that operates through
subsidiaries in the United States, Europe and the Asia-Pacific
region. 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. We also operate
3Dpropartstm,
a comprehensive service that offers our customers rapid
prototyping and direct rapid manufacturing services for the
production of precision parts.
Customers who use our proprietary systems are able to produce
physical objects from digital data using commonly available
computer-aided design software, often referred to as CAD
software, or other digital-media devices such as engineering
scanners and MRI or CT medical scanners. Our systems
ability to produce functional parts from digital art enables
customers to create detailed prototypes or production-quality
parts quickly and effectively without a significant investment
in expensive tooling, greatly reducing the time and cost
required to produce prototypes or to customize production parts.
Our systems use additive part-production processes for
applications that require rapid design iterations, prototyping
and manufacturing. We believe that our systems enable our
customers to develop better quality, higher functionality new
products faster and more economically than other more
traditional methods.
Our product development efforts are focused on expanding our
portfolio of
3-D printing
and rapid manufacturing solutions, which we believe represents
significant growth opportunities for our business. We also
believe that our core rapid prototyping business and our parts
production service provide us with significant growth
opportunities. In recent years, we have worked to develop new
systems and materials and have enhanced our overall technology
to rejuvenate and reshape our core business while developing new
products that address our
3-D printing
and rapid manufacturing growth initiatives. With respect to the
uses of our systems:
|
|
|
|
|
In rapid manufacturing applications, our systems are used to
manufacture end-use parts that have the appearance and
characteristics of high-quality injection-molded parts.
Customers who adopt our rapid manufacturing solutions avoid the
significant costs of complex
set-ups and
changeovers and eliminate the costs and lead-times associated
with conventional tooling methods or hand labor. Rapid
manufacturing enables our customers to produce optimized designs
since they can design for function, unconstrained by normal
design-for-manufacture
considerations.
|
|
|
|
In 3-D
printing applications, our systems are used to produce
three-dimensional shapes, primarily for visualizing and
communicating concepts, various design applications and other
applications, including supply chain management, functional
modeling, architecture, art, surgical modeling, medical end-use
applications such as hearing aids and dental uses, and
entertainment.
|
|
|
|
In rapid prototyping applications, our systems are used to
quickly and efficiently generate product-concept models,
functional prototypes to test form, fit and function, master
patterns and expendable patterns for urethane and investment
casting that are often used as a cost-effective means of
evaluating product designs and short-run production.
|
Our products offer our customers an integrated systems solution
consisting of equipment and embedded software, integrated
consumable materials and customer service. Our extensive
solutions portfolio is based on four distinct and proprietary
technology platforms, discussed in greater detail below, that
enable us to offer our customers a way to transform the manner
in which they design, develop and manufacture their products.
Products
and Services
Our principal technology platforms include our stereolithography
or
SLA®
equipment, our selective laser sintering or
SLS®
equipment, our multi-jet
3-D printing
equipment and our film transfer imaging (FTI)
2
equipment. These systems use patented and proprietary
stereolithography, selective laser sintering and various
3-D printing
and film transfer imaging methods and processes that take
digital data input from CAD software or three-dimensional
scanning and sculpting devices to fabricate physical objects
from our proprietary family of engineered plastic, metal and
composite materials.
We blend, market and distribute a wide range of proprietary
consumable, engineered plastics, composites and materials that
we market to produce physical parts from digital art using our
systems. We augment and complement our own portfolio of
engineered materials with materials that we purchase from third
parties under private-label and distribution arrangements.
We provide to our customers a comprehensive suite of proprietary
software tools that are embedded within our systems and pre-sale
as well as post-sale field services, ranging from applications
development to installation, warranty and maintenance services.
In 2009, we introduced our
3Dpropartstm
service, expanding our distribution channel for rapid
prototyping and direct rapid manufacturing parts.
3Dpropartstm
offers a broad range of precision plastic and metal parts and
assembly capabilities produced from a wide range of materials
using a variety of additive and traditional manufacturing
processes.
Systems
Solutions
SLA®
systems and related equipment
Stereolithography, or
SLA®,
systems convert our engineered materials and composites into
solid cross-sections, layer by layer, until the desired fully
fused objects are completely produced. Our
SLA®
systems are capable of making multiple distinct objects at the
same time and are designed to produce highly accurate objects in
a wide range of sizes and shapes and material performance
characteristics.
Stereolithography parts are known for their fine feature detail,
resolution and surface quality. Product designers, engineers and
marketers in many large manufacturing companies throughout the
world use our
SLA®
systems for a wide variety of applications, ranging from short
production runs of end-use products, to producing prototype
parts for automotive, aerospace and various consumer and
electronic applications.
Our
SLA®
systems are capable of rapidly producing tools, fixtures, jigs
and end-use parts, including parts for dental, hearing aid,
jewelry and motor-sport applications. They are also designed for
uses such as building functional models that enable users to
share ideas and evaluate concepts; performing form, fit and
function testing on working assemblies and building expendable
patterns for metal casting.
Our family of
SLA®
systems offers a wide range of capabilities, including size,
speed, accuracy, throughput and surface finish in different
formats and price points. We have devoted substantial efforts to
introducing new systems with new capabilities. Our
iProtm
family of
SLA®
systems includes our
iProtm
8000 and
iProtm
9000. The
iProtm
8000 system is a mid-range
SLA®
system. Our
iProtm
9000
SLA®
Center is a professional stereolithography system for the
production of ultra high-definition Pro-Parts from
our integrated portfolio of proprietary
Accura®
Plastics. Our
iProtm
SLA®
Centers are designed to quickly and economically produce durable
plastic parts with unprecedented surface smoothness, feature
resolution, edge definition and tolerances that rival the
accuracy of CNC-machined plastic parts. The
iProtm
systems are our most advanced, flexible, high-capacity
stereolithography systems that are designed to enable customers
to mass customize and produce high-quality, end-use parts,
patterns, wind tunnel models, fixtures and tools consistently
and economically using our proprietary and other
stereolithography materials. In 2009 we continued to offer the
Vipertm
SLA®
system. The
Vipertm
SLA®
system operates in a similar fashion as the
iProtm
systems, but has a smaller build area and a lower build
throughput rate and is capable of building smaller fine-featured
parts.
SLS®
systems and related equipment
Our selective laser sintering, or
SLS®,
additive manufacturing systems convert our proprietary
engineered materials and composites by melting and fusing, or
sintering, these materials into solid cross-sections, layer-
3
by-layer, to produce finished parts.
SLS®
systems can create parts from a variety of proprietary
engineered plastic and metal powders and are capable of
processing multiple parts in a single build session.
Customer uses of our
SLS®
systems include functional test models and end-use parts, which
enable our customers to create customized parts economically
without tooling. The combination of materials flexibility, part
functionality and high throughput of our
SLS®
technology makes it well suited for rapid manufacturing of
durable parts for applications in various industries, including
aerospace, automotive, packaging, machinery and motor-sports
applications.
Our family of
SLS®
systems includes our line of
sProtm
SLS®
systems, automated selective laser sintering manufacturing
systems that are designed to enable our customers to mass
customize and produce high-quality end-use parts, patterns,
fixtures and tools consistently and economically from our
proprietary engineered plastics,
on-site and
on-demand. In 2009 we introduced our new
sProtm
60 family of
SLS®
production systems, which features enhanced productivity and
part accuracy within an optimized build volume, new
CleanSweeptm
IR sensor technology, the ability to process multiple materials
and the flexibility to change materials quickly.
We offer the
Sinterstation®
Protm
SLM direct metal sintering system through a private label
arrangement that we entered into with a third-party supplier.
These systems are capable of producing fully-dense direct metal
parts from a variety of metal powders, including stainless
steel, chrome cobalt, titanium and tool steel.
3-D
printing systems
Our expanding line of
3-D printers
is ideal for use in engineering design environments for product
development, marketing communication groups, rapid manufacturing
such as jewelry and dental laboratory direct casting
applications and within engineering schools and other
educational institutions. Our range of
3-D printers
includes our multi-jet equipment as well as our new film
transfer imaging-based equipment.
All our 3-D
printers accept digital input from either a three-dimensional
CAD station or a scanned
3-D image,
converting this input data one slice thickness at a time, to
create a solid part one layer at a time. These printers offer
superior finished surfaces, no geometry limitations,
plug-and-play
installation,
point-and-print
functionality and
best-in-class
part resolution in a variety of price points and materials.
Our family of multi-jet printers consists of several models,
including our
ProJettm
systems which have replaced our family of
InVision®
systems. All our printers are designed to produce
high-definition, functional and durable models for form, fit and
function analysis, including certain models that are capable of
ultra-fine resolution for precision dental and jewelry
applications. We began shipping our new large format
3-D printer,
the
ProJettm
5000, during the fourth quarter of 2009.
During the second quarter of 2009, we commenced commercial
shipment of our
V-Flash®
Desktop Printer, our first
sub-ten
thousand dollar desktop printer. As discussed above, we believe
that, in addition to our focus on and pursuit of rapid
manufacturing opportunities,
3-D printing
provides us with a significant opportunity for growth. The
V-Flash®
Desktop Printer is the first product based on our new FTI
technology platform, and it is designed to build
three-dimensional models within hours in a home or an office,
enabling designers, engineers, hobbyists and students to
imagine, design and build their ideas at their desks.
Software
As part of our comprehensive and integrated systems solutions,
we offer embedded proprietary part-preparation software. This
software is designed to enhance the interface between our
customers digital data and our systems. Digital data, such
as a three-dimensional CAD-produced digital image, is converted
within our proprietary software so that, depending on the
specific software, the image can be viewed, rotated and scaled,
and model structures can be added. The software then generates
the information that is used by the
SLA®
or
SLS®
system or by the
3-D printer
to create solid objects. From time to time, we also work with
third parties to develop complementary software for our systems.
4
Materials
As part of our integrated systems approach to business, we
blend, market, sell and distribute consumable, engineered
plastic and metal materials and composites under several
proprietary brand names for use in all our systems. We market
our stereolithography materials under the
Accura®
brand, our selective laser sintering materials under the
DuraForm®,
CastFormtm
and
LaserFormtm
brands, and materials for our
3-D printers
under the
VisiJet®
brand.
Many of our systems have built-in electronic intelligence that
communicates vital processing and quality statistics in real
time with the systems. For these systems, we furnish materials
that are designed for use in those systems and that are packaged
in smart cartridges designed to enhance system functionality,
up-time, materials shelf life and overall system reliability,
with the objective of providing our customers with a built-in
quality management system.
We work closely with our customers to optimize the performance
of our materials in their applications. Our expertise in
materials formulation, combined with our process, software and
equipment-design strengths, enable us to help our customers
select the material that best meets their needs and to obtain
optimal results from the material. We also work with third
parties to develop different types and varieties of materials
designed to meet the needs of our customers.
Stereolithography
engineered materials and composites
Our family of proprietary stereolithography materials and
composites offers a variety of plastic-like performance
characteristics and attributes designed to mimic specific
engineered thermoplastic materials. When used in our
SLA®
systems, our proprietary liquid materials turn into a solid
surface one layer at a time, and through an additive building
process all of the layers bond and fuse together to make a solid
part.
Our portfolio of
Accura®
stereolithography materials includes general-purpose as well as
specialized materials and composites that offer our customers
the opportunity to choose the material that is best suited for
the parts and models that they intend to produce. To further
complement and expand the range of materials we offer to our
customers, we also distribute
SLA®
materials under recognized third-party brand names.
In 2009, we introduced our
Accura®
e-Stonetm
family of materials developed specifically to produce
dental-digital models from data derived from dental intraoral
and impression scanners without pouring traditional stone
models, saving time and money for dentists and dental
laboratories and reducing infection risks.
Laser
sintering materials and composites
Our family of proprietary selective laser sintering materials
and composites includes a range of rigid plastic, elastomeric
and metal materials as well as various composites of these
ingredients. Because of the built-in versatility of our
selective laser sintering systems, the same systems can be used
to process multiple materials.
Our family of
DuraForm®
materials includes
CastFormtm
and
LaserFormtm
proprietary
SLS®
materials. In 2009, we began selling
DuraForm®
FR 100 Plastic, a new flame-retardant material that meets the
requirements of a broad range of aerospace and consumer-product
applications.
Our
SLS®
materials are used to create functional end-use parts,
prototypes and durable patterns as well as assembly jigs and
fixtures. They are also used to produce flexible, rubber-like
parts such as shoe soles, gaskets and seals, patterns for
investment casting, functional tooling such as injection molding
tool inserts and end-use parts used in customized rapid
manufacturing applications. Examples of rapid manufacturing
parts produced by our customers using our
SLS®
systems include air ducts for aircraft and engine cowling parts
for unmanned aerial vehicles. Product designers and developers
from major automotive, aerospace and consumer products companies
use
DuraForm®
parts extensively as functional test models, even in harsh test
environment conditions. Aerospace and medical companies use our
SLS®
systems to produce end-use parts directly, which enables them to
create customized parts economically without tooling. Parts made
from
DuraForm®
and
5
LaserFormtm
materials are cost effective and can compete favorably with
traditional manufacturing methods, especially where part
complexity is high. Competing alternatives to our technology
generally involve, among other things, costs for tooling and
minimum run quantities of the parts produced.
3-D
printing materials
Our family of
VisiJet®
3-D printing
materials includes part-building materials and compatible
disposable support materials that are used in the modeling
process and facilitate an easily melted away support removal
process. These materials are sold to our customers packaged in
proprietary smart cartridges that are used to produce parts in
our 3-D
printers. Our family of proprietary
VisiJet®
materials is ideal for study models and form, fit and function
engineering studies. Our family of
VisiJet®
wax materials and special dissolvable support materials is used
for direct casting applications such as custom jewelry
manufacturing, dental crowns and bridge work and casting and
micro-casting applications.
Customer
Services
We provide a variety of comprehensive customer services and
local application and field support on a worldwide basis for all
of our stereolithography and selective laser sintering systems.
For our 3-D
printing systems, we provide these services and field support
either directly or through a network of authorized resellers or
other sources. We are continuing to build a reseller channel for
our line of
3-D printers
and to train our resellers to perform installations and services
for those printers. We have also entered into arrangements with
selected outside service providers to augment our service
capabilities with respect to each of our lines of equipment.
The services and field support that we provide include
installation of new systems at the customers sites, system
warranties, several maintenance agreement options and a wide
variety of hardware upgrades, software updates and upgrades and
performance enhancement packages. We also provide services to
assist our customers and resellers in developing new
applications for our technologies, to facilitate the use of our
technology for the customers applications, to train
customers on the use of newly acquired systems and to maintain
our systems at the customers sites.
New
SLS®,
SLA®
and 3-D
printer systems are sold with
on-site
maintenance support that generally covers a warranty period
ranging from 90 days to one year. We offer service
contracts that enable our customers to continue maintenance
coverage beyond the initial warranty period. These service
contracts are offered with various levels of support and are
priced accordingly. We employ customer-support sales engineers
in North America, several countries in Europe and in parts of
the Asia-Pacific region to support our worldwide customer base.
As a key element of warranty and service contract maintenance,
our service engineers provide regularly scheduled preventive
maintenance visits to customer sites. We also provide training
to our distributors and resellers to enable them to perform
these services.
We distribute spare parts on a worldwide basis to our customers,
primarily from locations in the U.S. and Europe.
We also offer upgrade kits for certain of our systems that we
sell to existing customers to enable them to take advantage of
new or enhanced system capabilities. However, we have
discontinued upgrade support for certain of our older legacy
systems.
We operate a training facility, 3D Systems University, in
partnership with York Technical College. The facility operates
as part of York Technical College to train our employees,
customers, students and others in the use of our systems and
technologies. Through this relationship with York Technical
College, we outsource a portion of training in the use and
operation of our systems that we previously performed.
In 2009, with the launch of our
3Dpropartstm
service, we began supplying finished parts to our customers
through a global network of parts printing service locations.
Customers may procure a complete range of precision plastic and
metal parts and assemblies produced using a variety of
finishing, molding and casting capabilities utilizing both
traditional and additive manufacturing processes. Preferred
service providers and leading service bureaus also can use
3Dpropartstm
as their comprehensive order-fulfillment center.
6
Global
Operations
We operate in North America and in six countries in Europe and
the Asia-Pacific region, and distribute our products in those
countries as well as in other parts of the world. Revenue in
countries outside the U.S. accounted for 56.6%, 60.6% and
58.2% of consolidated revenue in the years ended
December 31, 2009, 2008 and 2007, respectively.
In maintaining foreign operations, our business is exposed to
risks inherent in such operations, including those of currency
fluctuations. Information on currency exchange risk appears in
Part II, Item 7A, Quantitative and Qualitative
Disclosures about Market Risk and Item 8,
Financial Statements and Supplementary Data, of this
Annual Report on
Form 10-K
(Form 10-K),
which information is incorporated herein by reference.
Financial information about geographic areas, including revenue
and long-lived assets, appears in Note 22 to the
Consolidated Financial Statements in Part II, Item 8,
Financial Statements and Supplementary Data, of this
Form 10-K,
which information is incorporated herein by reference.
Marketing
and Customers
Our sales and marketing strategy focuses on an integrated
systems approach that is directed to providing equipment,
materials and services to meet a wide range of customer needs,
including traditional prototyping,
3-D printing
and rapid manufacturing. This integrated approach includes the
sales and marketing of our parts service, either as an adjunct
to a customers in-house use of additive technologies or to
the much broader audience of users who do not have dedicated
SLA®
or
SLS®
production solutions or
3-D
printers. Our sales organization is responsible for the sale of
our products on a worldwide basis and for the management and
coordination of our growing network of authorized resellers of
3-D printing
and certain of our other systems. Our direct sales force
consists of salespersons who work throughout North America,
Europe and parts of the Asia-Pacific region. Our application
engineers provide professional services through pre-sales
support and assist existing customers so that they can take
advantage of our latest materials and techniques to improve part
quality and machine productivity. This group also leverages our
customer contacts to help identify new application opportunities
that utilize our proprietary processes and access to our
professional parts printing service,
3Dpropartstm.
As of December 31, 2009, our worldwide sales, application
and service staff consisted of 119 employees.
We sell
SLA®
and
SLS®
systems and our related materials and services through our
direct sales organization, which is supported by our dedicated
sales, service and application engineers worldwide. In certain
areas of the world where we do not operate directly, we have
appointed sales agents, resellers and distributors who are
authorized to sell on our behalf our
SLA®
and
SLS®
systems and the materials used in them. Certain of those agents,
resellers and distributors also provide services to customers in
those geographic areas.
Our 3-D
printers and our related materials and services are sold
worldwide directly and through a network of authorized
distributors and resellers who are managed and directed by a
dedicated team of channel sales managers.
As a complement to our equipment and materials sales, in 2009 we
introduced our
3Dpropartstm
service, a global network of parts printing service locations.
3Dpropartstm
is designed to provide our customers and prospects a single
source for all of their design to manufacturing needs. Through
our
3Dpropartstm
service, we offer access to a wide range of additive and
traditional manufacturing technologies, our full line of
available materials from plastics to metals and our project
management and finishing capabilities through 24/7 on-line
quoting and secure ordering.
Our customers include major companies in a broad range of
industries, including manufacturers of automotive, aerospace,
computer, electronic, defense, education, consumer, medical and
dental products. Purchasers of our systems include original
equipment manufacturers, or OEMs, government agencies and
universities that generally use our systems for research
activities, and independent service bureaus that provide
7
rapid prototyping and manufacturing services to their customers
for a fee. No single customer accounted for more than
10 percent of our consolidated revenue in the year ended
December 31, 2009.
Production
and Supplies
We have outsourced certain of our equipment assembly and
refurbishment activities to several selected design and
engineering companies and suppliers. These suppliers also carry
out quality control procedures on our systems prior to their
shipment to customers. As part of these activities, these
suppliers have responsibility for procuring the components and
sub-assemblies
that are used in our systems. This has reduced our need to
procure or maintain inventories of raw materials,
work-in-process
and spare parts related to our equipment assembly and
maintenance activities. We purchase finished systems from these
suppliers pursuant to forecasts and customer orders that we
supply to them. While the outsource suppliers of our systems
have responsibility for the supply chain of the components for
the systems they assemble, the components, parts and
sub-assemblies
that are used in our systems are generally available from
several potential suppliers.
During 2009 we moved the assembly of our
ProJetTM
line of 3-D
printers and certain other equipment assembly activities, which
previously had been outsourced, to our Rock Hill, South Carolina
facility, enabling us to better utilize our facility, plan
production and lower costs.
We produce certain materials at our facilities in Marly,
Switzerland and Rock Hill, South Carolina. We also have
arrangements with third parties who blend to our specifications
certain of the materials that we sell under our own brand names,
and as discussed above we purchase other materials from third
parties for resale to our customers.
Our equipment assembly and blending activities and certain of
our research and development activities are subject to
compliance with applicable federal, state and local provisions
regulating the storage, use and discharge of materials into the
environment. We believe that we are in compliance with such
regulations as currently in effect in all material respects and
that continued compliance with them will not have a material
adverse effect on our capital expenditures, results of
operations or consolidated financial position.
Research
and Development
We maintain an ongoing program of research and development to
develop new systems and materials and to enhance our product
lines as well as to improve and expand the capabilities of our
systems and related software and materials. This includes all
significant technology platform developments for
SLA®,
SLS®,
3-D printing
and FTI systems and materials. Our development efforts are
augmented by development arrangements with research
institutions, customers, suppliers of material and hardware and
the assembly and design firms that we have engaged to assemble
our systems. We also engage third-party engineering companies
and specialty materials companies in specific development
projects from time to time.
Research and development expenses were $11.1 million,
$15.2 million and $14.4 million in 2009, 2008 and
2007, respectively.
We did not capitalize any internally developed software costs in
2009 or 2008. In 2007, we capitalized $0.4 million of
internally developed software costs associated with the
V-Flash®
Desktop Printer. See Note 2 to the Consolidated Financial
Statements.
Intellectual
Property
At December 31, 2009, we held 353 patents worldwide. At
that date, we also had 152 pending patent applications worldwide.
The principal issued patents covering our stereolithography
processes will expire at varying times through 2022. The
principal issued patents covering our selective laser sintering
processes will expire at varying times through 2024. The
principal issued patents covering our multi-jet
3-D printing
processes will expire at varying times through 2024. The
principal issued patents covering our FTI processes will expire
at varying times
8
through 2027. We have also filed a number of patent applications
covering inventions contained in our recently introduced systems
for each of our technology platforms.
We are also a party to various licenses that have had the effect
of broadening the range of the patents, patent applications and
other intellectual property available to us.
We believe that, while our patents and licenses provide us with
a competitive advantage, our success depends primarily on our
marketing, business development and applications know-how and on
our ongoing research and development efforts. Accordingly, we
believe the expiration of any of the patents, patent
applications or licenses discussed above would not be material
to our business or financial position.
Competition
Competition for most of our
3-D
printing, prototyping and rapid manufacturing systems is based
primarily on process know-how, product application know-how and
the ability to provide a full range of products and services to
meet customer needs. Competition is also based upon innovations
in 3-D
printing, rapid prototyping and rapid manufacturing systems and
materials. Accordingly, our ongoing research and development
programs are intended to enable us to maintain technological
leadership. Certain of the companies producing competing
products or providing competing services are well established
and may have greater financial resources.
Our principal competitors are companies that manufacture
machines that make, or that use machines to make, models,
prototypes, molds and small-volume to medium-volume
manufacturing parts. These include suppliers of computer
numerically controlled machines and machining centers, commonly
known as CNC, suppliers of plastics molding equipment, including
injection-molding equipment, suppliers of traditional machining,
milling and grinding equipment, and businesses that use such
equipment to produce models, prototypes, molds and small-volume
to medium-volume manufacturing parts. These conventional
machining, plastic molding and metal casting techniques continue
to be the most common methods by which plastic and metal parts,
models, functional prototypes and metal tool inserts are
manufactured.
Our competitors also include other suppliers of
stereolithography, laser sintering and
3-D printing
systems and materials as well as suppliers of alternative
additive manufacturing solutions such as suppliers of Fused
Deposition Modeling, or FDM, technology and suppliers of vacuum
casting equipment. Numerous suppliers of these products operate
both internationally and regionally, and many of them have
well-recognized product lines that compete with us in a wide
range of our product applications.
Competition in the parts printing service business is highly
fragmented, with most of the services suppliers operating on a
local level.
We have also entered into licensing or cross-licensing
arrangements with various companies in the United States and in
other countries that enable those companies to utilize our
technology in their products or that enable us to use their
technologies in our products. Under certain of these licenses,
we are entitled to receive, or we are obligated to pay,
royalties for the sale of licensed products in the U.S. or
in other countries. The amount of such royalties was not
material to our results of operations or consolidated financial
position for the three-year period ended December 31, 2009.
A number of companies currently sell materials that compete with
those we sell, and there are a wide number of suppliers of
services for the equipment that we sell.
We expect future competition to arise both from the development
of new technologies or techniques not encompassed by the patents
that we own or license, from the conventional machining, plastic
molding and metal casting techniques discussed above, and
through improvements to existing technologies, such as CNC and
rotational molding. We also expect to see increased competition
in parts printing services offerings.
Employees
At December 31, 2009, we had 387 full-time employees.
None of these employees is covered by collective bargaining
agreements although some of our employees outside the
U.S. are subject to local statutory employment
arrangements. We believe that our relations with our employees
are satisfactory.
9
Available
Information
Our website address is www.3Dsystems.com. The information
contained on our website is neither a part of, nor incorporated
by reference into, this
Form 10-K.
We make available free of charge through our website our Annual
Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K
and amendments to those reports, as soon as reasonably
practicable after we electronically file them with, or furnish
them to, the SEC.
Several of our corporate governance materials, including our
Code of Conduct, Code of Ethics for Senior Financial Executives
and Directors, Corporate Governance Guidelines, the current
charters of each of the standing committees of the Board of
Directors and our corporate charter documents and by-laws, are
also available on our website.
Forward-Looking
Statements
Certain statements made in this
Form 10-K
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 this
Form 10-K
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 the statements set forth below that explicitly
describe risks and uncertainties to which our business and our
financial condition and results of operations are subject,
readers are urged to consider statements in future or
conditional tenses or that include terms such as
believes, belief, expects,
intends, anticipates or
plans that appear in this
Form 10-K
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 our beliefs, assumptions and current
expectations concerning future events and trends, using
information currently available to us, and are necessarily
subject to uncertainties, many of which are outside our control.
We assume no obligation, and do not intend, to update these
forward-looking statements, except as required by applicable
law. The factors stated under the heading Cautionary
Statements and Risk Factors set forth below, as well as
other factors, could cause actual results to differ materially
from those reflected or predicted in 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 that you read in this
Form 10-K
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 to individuals
acting on our behalf are expressly qualified in their entirety
by this discussion. You should specifically consider the factors
identified in this
Form 10-K,
which would cause actual results to differ from those referred
to in forward-looking statements.
Cautionary
Statements and Risk Factors
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,
results of operations and financial condition. If any of the
risks described below or if any other risks and uncertainties
not currently known to us or that we currently deem not to be
material actually occur, our business, results of operations and
financial condition could be materially adversely affected. In
that event, the trading price of our common stock could decline,
and you could lose all or part of your investment in our common
stock.
The risks discussed below also include forward-looking
statements that are intended to provide our current expectations
with regards to those risks. There can be no assurance that our
current expectations will
10
be met, and our actual results may differ substantially from the
expectations expressed in these forward-looking statements.
If we
were unable to generate net cash flow from operations or if we
were unable to raise additional capital, our financial condition
could be adversely affected.
In 2009 our unrestricted cash and short-term investments
increased by $2.7 million to $24.9 million at
December 31, 2009 from $22.2 million at
December 31, 2008. During 2009, 2008 and 2007, net cash
provided by (used in) operations was $7.7 million,
($3.5) million and $2.6 million, respectively. We
cannot assure you that we would generate cash from operations or
other potential sources to fund future working capital needs and
meet capital expenditure requirements.
In early 2009 we repaid the remainder of our outstanding
industrial development bonds following the 2008 sale of our
Grand Junction facility. From
time-to-time
we may seek access to external sources of capital to fund
working capital needs, capital expenditures, acquisitions and
for other general corporate purposes. However, we cannot assure
you that capital would be available from external sources such
as bank credit facilities, debt or equity financings or other
potential sources to fund future operating costs, debt-service
obligations and capital requirements.
As a result of the recessionary economic conditions that have
persisted since 2008, credit markets have tightened
significantly such that the ability to obtain new capital has
become more challenging and more expensive. In addition, several
large financial institutions worldwide have either failed or
been dependent upon government assistance to continue to operate
as going concerns. If our ability to generate cash flow from
operations and our existing cash is inadequate to meet our
needs, our options for addressing such capital constraints
include, but are not limited to, (i) obtaining a revolving
credit facility from bank lenders, (ii) accessing the
public capital markets, or (iii) delaying certain of our
existing development projects. If it became necessary to access
additional capital it is likely that such alternatives in the
current market environment would be on less favorable terms than
we have historically obtained, which could have a material
adverse impact on our consolidated financial position, results
of operations or cash flows.
The lack of additional capital resulting from any inability to
generate cash flow from operations or to raise equity or debt
financing could force us to substantially curtail or cease
operations and would, therefore, have a material adverse effect
on our business and financial condition. Furthermore, we cannot
assure you that any necessary funds, if available, would be
available on attractive terms or that they would not have a
significantly dilutive effect on our existing stockholders. If
our financial condition worsens and we become unable to attract
additional equity or debt financing or enter into other
strategic transactions, we could become insolvent or be forced
to declare bankruptcy.
Global
economic, political and social conditions may harm our ability
to do business, increase our costs and negatively affect our
stock price.
The direction and relative strength of the global economy
remains uncertain due to softness in the real estate and
mortgage markets, among others, volatility in fuel and other
energy costs, difficulties in the financial services sector and
credit markets, continuing geopolitical uncertainties and other
macroeconomic factors affecting spending behavior. The prospects
for economic growth in the United States and other countries
remain uncertain, and may cause customers to further delay or
reduce technology purchases. These and other macroeconomic
factors had an adverse impact on the sales of our products in
2008 and 2009, leading to longer sales cycles, slower adoption
of new technologies and increased price competition. The global
financial crisis affecting the banking system and financial
markets have resulted in a tightening of credit markets, lower
levels of liquidity in many financial markets, and extreme
volatility in fixed income, credit, currency and equity markets.
These conditions have made it more difficult to obtain financing.
11
Given the continued weakness in the global economy, we face
risks that may arise from financial difficulties experienced by
our suppliers, resellers or customers, including:
|
|
|
|
|
The risk that customers or resellers to whom we sell our
products and services may face financial difficulties or may
become insolvent, which could lead to our inability to obtain
payment of accounts receivable that those customers or resellers
may owe;
|
|
|
|
The risk that key suppliers of raw materials, finished products
or components used in the products that we sell may face
financial difficulties or may become insolvent, which could lead
to disruption in the supply of systems, materials or spare parts
to our customers; and
|
|
|
|
The inability of customers, including resellers, suppliers and
contract manufacturers to obtain credit financing to finance
purchases of our products and raw materials used to build those
products.
|
We have managed through these uncertainties by reducing costs
and by the continued introduction of new products and services,
but there is no assurance these steps will be sufficient.
We
have made, and expect to continue to make, strategic
acquisitions that may involve significant risks and
uncertainties.
We completed three acquisitions in 2009, which were not
considered significant in accordance with
rule 3-05
of
Regulation S-X.
We intend to continue to evaluate acquisition opportunities in
the future in an effort to expand our business and enhance
stockholder value. Acquisitions involve certain risks and
uncertainties including:
|
|
|
|
|
Difficulty in integrating newly-acquired businesses and
operations in an efficient and cost-effective manner and the
risk that significant unanticipated costs or other problems
associated with integration may be encountered;
|
|
|
|
The challenges in achieving strategic objectives, cost savings
and other anticipated benefits;
|
|
|
|
The risk that our marketplaces do not evolve as anticipated and
that the technologies acquired do not prove to be those needed
to be successful in the marketplaces that we serve;
|
|
|
|
The risk that we assume significant liabilities that exceed the
limitations of any applicable indemnification provisions or the
financial resources of any indemnifying party;
|
|
|
|
The potential loss of key employees of the acquired
businesses; and
|
|
|
|
The risk of diverting management attention from our existing
operations.
|
Our
future success may depend on our ability to deliver products
that meet changing technology and customer needs.
Our business may be affected by rapid technological change,
changes in user and customer requirements and preferences,
frequent new product and service introductions embodying new
technologies and the emergence of new standards and practices,
any of which could render our existing products and proprietary
technology and systems obsolete. For that reason, we maintain an
ongoing research and development program that is designed to
improve our existing products and to develop and introduce new
products that enable us to maintain our technological
leadership. We believe that to remain competitive we must
continually enhance and improve the functionality and features
of our products, services and technologies. However, there is a
risk that we may not be able to:
|
|
|
|
|
Develop or obtain leading technologies useful in our business;
|
|
|
|
Enhance our existing products;
|
|
|
|
Develop new products and technologies that address the
increasingly sophisticated and varied needs of prospective
customers, particularly in the area of materials functionality;
|
12
|
|
|
|
|
Respond to technological advances and emerging industry
standards and practices on a cost-effective and timely
basis; or
|
|
|
|
Recruit and retain key technology employees.
|
We may
incur substantial costs enforcing or acquiring intellectual
property rights and defending against third-party claims as a
result of litigation or other proceedings.
In connection with the enforcement of our own intellectual
property rights, the acquisition of third-party intellectual
property rights or disputes related to the validity or alleged
infringement of third-party intellectual property rights,
including patent rights, we have been, are currently and may in
the future be subject to claims, negotiations or complex,
protracted litigation. Intellectual property disputes and
litigation may be costly and can be disruptive to our business
operations by diverting attention and energies of management and
key technical personnel, and by increasing our costs of doing
business. Although we have successfully defended or resolved
past litigation and disputes, we may not prevail in any ongoing
or future litigation and disputes.
Third-party intellectual property claims asserted against us
could subject us to significant liabilities, require us to enter
into royalty and licensing arrangements on unfavorable terms,
prevent us from manufacturing or licensing certain of our
products, subject us to injunctions restricting our sale of
products, cause severe disruptions to our operations or the
markets in which we compete, or require us to satisfy
indemnification commitments with our customers including
contractual provisions under various license arrangements. In
addition we may incur significant costs in acquiring the
necessary third-party intellectual property rights for use in
our products. Any of these could seriously harm our business.
We
derive a significant portion of our revenue from business
conducted outside the U.S and are subject to the risks of doing
business outside the U.S.
More than 50% of our consolidated revenue is derived from
customers in countries outside the U.S. There are many
risks inherent in business activities outside the
U.S. that, unless managed properly, may adversely affect
our profitability, including our ability to collect amounts due
from customers. While most of our operations outside the
U.S. are conducted in highly developed countries, they
could be adversely affected by:
|
|
|
|
|
Unexpected changes in laws, regulations and policies of
non-U.S. governments
relating to investments and operations, as well as
U.S. laws affecting the activities of U.S. companies
abroad;
|
|
|
|
Changes in regulatory requirements, including export controls,
tariffs and embargoes, other trade restrictions and antitrust
and data privacy concerns;
|
|
|
|
Rapid changes in government, economic and political policies,
political or civil unrest, terrorism or epidemics and other
similar outbreaks;
|
|
|
|
Fluctuations in currency exchange rates;
|
|
|
|
Seasonal reductions in business activity in certain parts of the
world, particularly during the summer months in Europe;
|
|
|
|
Limited protection for the enforcement of contract and
intellectual property rights in some countries;
|
|
|
|
Difficulties in staffing and managing foreign operations;
|
|
|
|
Taxation; and
|
|
|
|
Other factors, depending upon the specific country in which we
conduct business.
|
These uncertainties may make it difficult for us and our
customers to accurately plan future business activities and may
lead our customers in certain countries to delay purchases of
our products and services. More generally, these geopolitical,
social and economic conditions could result in increased
volatility in global financial markets and economies.
13
The consequences of terrorism or armed conflicts are
unpredictable, and we may not be able to foresee events that
could have an adverse effect on our market opportunities or our
business. We are uninsured for losses and interruptions caused
by terrorism, acts of war and similar events.
While the geographic areas outside the U.S. in which we
operate are generally not considered to be highly inflationary,
our foreign operations are sensitive to fluctuations in currency
exchange rates arising from, among other things, certain
intercompany transactions that are generally denominated, for
example, in U.S. dollars rather than their respective
functional currencies. Our operating results, assets and
liabilities are subject to the effect of foreign currency
translation when the operating results and the assets and
liabilities of our foreign subsidiaries are translated into
U.S. dollars in our consolidated financial statements. The
assets and liabilities of our foreign subsidiaries are
translated from their respective functional currencies into
U.S. dollars based on the translation rate in effect at the
end of the related reporting period. The operating results of
our foreign subsidiaries are translated to U.S. dollars
based on the average conversion rate for the related period.
Moreover, our operations are exposed to market risk from changes
in interest rates and foreign currency exchange rates and
commodity prices, which may adversely affect our results of
operations and financial condition. We seek to minimize these
risks through regular operating and financing activities and,
when we consider it to be appropriate, through the use of
derivative financial instruments. We do not purchase, hold or
sell derivative financial instruments for trading or speculative
purposes.
We
face significant competition in many aspects of our business,
which could cause our revenue and gross profit margins to
decline. Competition could also 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.
We compete for customers with a wide variety of producers of
equipment for models, prototypes, other three-dimensional
objects and end-use parts as well as producers of materials and
services for this equipment. Some of our existing and potential
competitors are researching, designing, developing and marketing
other types of competitive equipment, materials and services.
Many of these competitors have financial, marketing,
manufacturing, distribution and other resources substantially
greater than ours.
We also expect that future competition may arise from the
development of allied or related techniques for equipment and
materials that are not encompassed by our patents, from the
issuance of patents to other companies that may inhibit our
ability to develop certain products, and from improvements to
existing materials and equipment technologies.
We intend to follow a strategy of continuing product development
to enhance our position to the extent practicable. We cannot
assure you that we will be able to maintain our current position
in the field or continue to compete successfully against current
and future sources of competition. If we do not keep pace with
technological change and introduce new products, we may lose
revenue and demand for our products.
We
depend on a limited number of suppliers for components and
sub-assemblies
used in our systems and raw materials used in our materials. If
these relationships were to terminate, our business could be
disrupted while we locate an alternative supplier and our
expenses may increase.
We have outsourced the assembly of certain of our systems to
third-party suppliers, we purchase components and
sub-assemblies
for our systems from third-party suppliers, and we purchase raw
materials that are used in our materials, as well as certain of
those materials, from third-party suppliers.
While there are several potential suppliers of the components,
parts and
sub-assemblies
for our products, we currently choose to use only one or a
limited number of suppliers for several of these components,
including our lasers, materials and certain jetting components.
Our reliance on a single or limited number of vendors involves
many risks including:
|
|
|
|
|
Potential shortages of some key components;
|
|
|
|
Product performance shortfalls; and
|
14
|
|
|
|
|
Reduced control over delivery schedules, manufacturing
capabilities, quality and costs.
|
While we believe that we can obtain all of the components
necessary for our products from other manufacturers, we require
any new supplier to become qualified pursuant to our
internal procedures, which could involve evaluation processes of
varying durations. We generally have our systems assembled based
on our internal forecasts and the supply of raw materials,
assemblies, components and finished goods from third parties,
which are subject to various lead times. In addition, at any
time, certain suppliers may decide to discontinue production of
an assembly, component or raw material that we use. Any
unanticipated change in the sources of our supplies, or
unanticipated supply limitations, could increase production or
related costs and consequently reduce margins.
If our forecasts exceed actual orders, we may hold large
inventories of slow-moving or unusable parts, which could have
an adverse effect on our cash flow, profitability and results of
operations.
We have engaged selected design and manufacturing companies to
assemble certain of our equipment, including our
SLA®,
SLS®
and certain
3-D printing
systems. In carrying out these outsourcing activities, we face a
number of risks, including:
|
|
|
|
|
The risk that the parties that we identify and retain to perform
assembly activities may not perform in a satisfactory manner;
|
|
|
|
The risk of disruption in the supply of systems to our customers
if such third parties either fail to perform in a satisfactory
manner or are unable to supply us with the quantity of systems
that are needed to meet then current customer demand; and
|
|
|
|
The risk of insolvency of these suppliers as well as the risk
that we face, as discussed above, in dealing with a limited
number of suppliers.
|
Costs
of certain employee benefits may continue to rise.
Although we have taken steps to contain volatility in medical
and employee benefits, there are risks that these benefit costs
may increase as a result of:
|
|
|
|
|
Continued increases in medical costs related to an aging
workforce, increased employee usage of medical benefits or
medical inflation; and
|
|
|
|
Material changes in legislation impacting medical or employee
benefits.
|
We
face risks in connection with changes in energy-related
expenses.
We and our suppliers depend on various energy products in
manufacturing processes used to produce our products. Generally,
we acquire products at market prices and do not use financial
instruments to hedge energy prices. As a result, we are exposed
to market risks related to changes in energy prices. In
addition, many of the customers and industries to whom we market
our systems and materials are directly or indirectly dependent
upon the cost and availability of energy resources.
Our business and profitability may be materially and adversely
affected to the extent that our or our customers
energy-related expenses increase, both as a result of higher
costs of producing, and potentially lower profit margins in
selling, our products and materials and because increased energy
costs may cause our customers to delay or reduce purchases of
our systems and materials.
The
variety of products that we sell could cause significant
quarterly fluctuations in our gross profit margins, and those
fluctuations in margins could cause fluctuations in operating
income or loss and net income or net loss.
We continuously work to expand and improve our product
offerings, including our systems, materials and services, the
number of geographic areas in which we operate and the
distribution channels we use to reach various target product
applications and customers. This variety of products,
applications and channels involves a range of gross profit
margins that can cause substantial quarterly fluctuations in
gross profit and gross profit
15
margin depending upon the variety of product shipments from
quarter to quarter. We may experience significant quarterly
fluctuations in gross profit margins or operating income or loss
due to the impact of the variety of products, channels or
geographic areas in which we sell our products from period to
period. In some quarters, it is possible that results could be
below expectations of analysts and investors. If so, the price
of our common stock may be volatile or decline.
We may
be subject to product liability claims, which could result in
material expense, diversion of management time and attention and
damage to our business reputation.
Products as complex as those we offer may contain undetected
defects or errors when first introduced or as enhancements are
released that, despite testing, are not discovered until after
the product has been installed and used by customers. This could
result in delayed market acceptance of the product, claims from
customers or others, damage to our reputation and business or
significant costs to correct the defect or error.
We attempt to include provisions in our agreements with
customers that are designed to limit our exposure to potential
liability for damages arising from defects or errors in our
products. However, the nature and extent of these limitations
vary from customer to customer, their effect is subject to a
variety of legal limitations, and it is possible that these
limitations may not be effective as a result of unfavorable
judicial decisions or laws enacted in the future.
The sale and support of our products entails the risk of product
liability claims. Any product liability claim brought against
us, regardless of its merit, could result in material expense,
diversion of management time and attention, damage to our
business reputation and cause us to fail to retain existing
customers or to fail to attract new customers.
Historically,
our common stock has been characterized by generally low daily
trading volume, and our common stock price has been
volatile.
The price of our common stock ranged from $3.76 to $11.92 per
share during 2009. Factors that may have a significant impact on
the market price of our common stock include:
|
|
|
|
|
Our perceived value in the securities markets;
|
|
|
|
Future announcements concerning developments affecting our
business or those of other companies in our industry, including
the receipt or loss of substantial orders for products;
|
|
|
|
Overall trends in the stock market;
|
|
|
|
The impact of changes in our results of operations, our
financial condition or our prospects on how we are perceived in
the securities markets;
|
|
|
|
Changes in recommendations of securities analysts; and
|
|
|
|
Sales or purchases of substantial blocks of stock.
|
The
number of shares of common stock issuable upon the exercise of
outstanding stock options could dilute your ownership and
negatively impact the market price for our common
stock.
Approximately 0.9 million shares of common stock were
issuable upon the exercise of outstanding stock options at
December 31, 2009, all of which were fully vested and
remained exercisable at that date.
Our
Board of Directors is authorized to issue up to 5 million
shares of preferred stock.
The Board of Directors is authorized to issue up to
5 million shares of preferred stock, of which
1 million shares have been authorized as Series A
Preferred Stock. The Board of Directors is authorized to issue
these shares of preferred stock in one or more classes or series
without further action of the stockholders and in that regard to
determine the issue price, rights, preferences and privileges of
any such class or series of preferred stock generally without
any further vote or action by the stockholders. The rights of
the holders of any outstanding series of preferred stock may
adversely affect the rights of holders of common stock.
16
Our ability to issue preferred stock gives us flexibility
concerning possible acquisitions and financings, but it could
make it more difficult for a third party to acquire a majority
of our outstanding common stock. In addition, any preferred
stock that is issued may have other rights, including dividend
rights, liquidation preferences and other economic rights,
senior to the common stock, which could have a material adverse
effect on the market value of our common stock.
The
stockholders rights plan adopted by the Board of Directors
in 2008 may inhibit takeovers and may adversely affect the
market price of our common stock.
Our Board of Directors approved the creation of our
Series A Preferred Stock and adopted a stockholders
rights plan pursuant to which it declared a dividend of one
Series A Preferred Stock purchase right for each share of
our common stock held by stockholders of record as of the close
of business on December 22, 2008. The preferred share
purchase rights attach to any additional shares of common stock
issued after December 22, 2008. Presently these rights are
not exercisable and trade with the shares of our common stock.
Under the rights plan, these rights generally become exercisable
only if a person or group acquires or commences a tender or
exchange offer for 15 percent or more of our common stock.
If the rights become exercisable, each right permits its holder
to purchase one one-hundredth of a share of Series A
Preferred Stock for the exercise price of $55.00 per right. The
rights plan also contains customary flip-in and
flip-over provisions such that if a person or group
acquires beneficial ownership of 15 percent or more of our
common stock, each right will permit its holder, other than the
acquiring person or group, to purchase shares of our common
stock for a price equal to the quotient obtained by dividing
$55.00 per right by one-half of the then current market price of
our common stock. In addition, if, after a person acquires such
ownership, we are later acquired in a merger or similar
transaction, each right will permit its holder, other than the
acquiring person or group, to purchase shares of the acquiring
corporations stock for a price equal to the quotient
obtained by dividing $55.00 per right by one-half of the then
current market price of the acquiring companys common
stock, based on the market price of the acquiring
corporations stock prior to such merger.
The stockholders rights plan and the associated
Series A Preferred Stock purchase rights may discourage a
hostile takeover and prevent our stockholders from receiving a
premium over the prevailing market price for the shares of our
common stock.
Various
provisions of Delaware law may inhibit changes in control not
approved by our Board of Directors and may have the effect of
depriving our stockholders of an opportunity to receive a
premium over the prevailing market price of our common stock in
the event of an attempted hostile takeover.
One of these Delaware laws prohibits us from engaging in a
business combination with any interested stockholder (as defined
in the statute) for a period of three years from the date that
the person became an interested stockholder, unless certain
conditions are met.
Our
balance sheet contains several categories of intangible assets
totaling $52.3 million at December 31, 2009 that we
could be required to write off or write down in the event of the
impairment of certain of those assets arising from any
deterioration in our future performance or other circumstances.
Such write-offs or write-downs could adversely impact our future
earnings and stock price, our ability to obtain financing and
our customer relationships.
At December 31, 2009, we had $48.7 million in goodwill
capitalized on our balance sheet. Accounting Standards
Codification (ASC) Section 350,
Intangibles Goodwill and Other, requires
that goodwill and some long-lived intangibles be tested for
impairment at least annually. In addition, goodwill and
intangible assets are tested for impairment at other times as
circumstances warrant, and such testing could result in
write-downs of some of our goodwill and long-lived intangibles.
Impairment is measured as the excess of the carrying value of
the goodwill or intangible asset over the fair value of the
underlying asset. A key factor in determining whether impairment
has occurred is the relationship between our market
capitalization and our book value. Accordingly, we may, from
time to time, incur impairment charges, which are recorded as
operating expenses when they are incurred and would reduce our
net income and adversely affect our operating results in the
period in which they are incurred.
17
As of December 31, 2009, we had $3.6 million of other
net intangible assets, consisting of licenses, patents, and
other intangibles that we amortize over time. Any material
impairment to any of these items could adversely affect our
results of operations and could affect the trading price of our
common stock in the period in which they are incurred.
For additional information, see Notes 6 and 7 to the
Consolidated Financial Statements and Managements
Discussion and Analysis of Financial Condition and Results of
Operations Critical Accounting Policies and
Significant Estimates Goodwill and other
intangible and long-lived assets.
|
|
Item 1B.
|
Unresolved
Staff Comments.
|
None.
We own office and production facilities in Lawrenceburg,
Tennessee and lease the remainder of our operating facilities,
which are general purpose facilities.
We occupy an 80,000 square-foot headquarters and research
and development facility in Rock Hill, South Carolina, which we
lease pursuant to a lease agreement with KDC-Carolina
Investments 3, LP. After its initial term ending August 31,
2021, the lease provides us with the option to renew the lease
for two additional five-year terms as well as the right to cause
KDC, subject to certain terms and conditions, to expand the
leased premises during the term of the lease, in which case the
term of the lease would be extended. The lease is a triple net
lease and provides for the payment of base rent of
$0.7 million annually through 2020, including rent
escalations in 2011 and 2016, and $0.5 million in 2021.
Under the terms of the lease, we are obligated to pay all taxes,
insurance, utilities and other operating costs with respect to
the leased premises. The lease also grants us the right to
purchase the leased premises and undeveloped land surrounding
the leased premises on terms and conditions described more
particularly in the lease.
We own 35,000 square feet of office and production
facilities in Lawrenceburg, Tennessee at which we produce a
broad range of finished parts and assemblies.
We lease an 11,000 square-foot advanced research and
development facility in Valencia, California. We also lease a
9,000 square-foot general purpose facility in Marly,
Switzerland at which we blend stereolithography and
3-D printing
materials and composites. We lease space in a small
manufacturing facility in Goodland, Indiana where we manufacture
finished parts for sale to customers. We also lease various
sales and service offices in France, Germany, the United
Kingdom, Italy and Japan.
We believe that the facilities described above are adequate to
meet our needs for the foreseeable future.
|
|
Item 3.
|
Legal
Proceedings.
|
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 we engaged in anticompetitive behavior with respect to
resins used in large-frame stereolithography machines. The
complaint further asserted that we are infringing upon two of
DSM Desotechs patents relating to stereolithography
machines. We understand that DSM Desotech estimates the damages
associated with its claims to be in excess of $40 million.
Following a decision of the Court on our motion to dismiss the
non-patent causes of the action, DSM Desotech filed a second
amended complaint on March 2, 2009 in which it reasserted
causes of action previously dismissed by the Court. We filed an
answer to the second amended complaint on March 19, 2009 in
which, among other things, we denied the material allegations of
the second amended complaint. Discovery is proceeding on the
claims pending in this case.
We intend to vigorously contest all of the claims asserted by
DSM Desotech.
18
We are also involved in various other legal matters incidental
to our business. We believe, after consulting with counsel, that
the disposition of these other legal matters will not have a
material effect on our consolidated results of operations or
consolidated financial position.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders.
|
No matters were submitted to a vote of security holders during
the fourth quarter of 2009.
Executive
and Other Officers
The information appearing in the table below sets forth the
current position or positions held by each of our officers and
his age as of February 1, 2010. All our officers serve at
the pleasure of the Board of Directors. There are no family
relationships among any of our officers or directors.
|
|
|
|
|
|
|
Age as of
|
|
Name and Current Position
|
|
February 1, 2010
|
|
|
Abraham N. Reichental
President and Chief Executive Officer
|
|
|
53
|
|
Charles W. Hull
Executive Vice President, Chief Technology Officer
|
|
|
70
|
|
Robert M. Grace, Jr.
Vice President, General Counsel and Secretary
|
|
|
62
|
|
Damon J. Gregoire
Vice President and Chief Financial Officer
|
|
|
41
|
|
Kevin P. McAlea
Vice President
|
|
|
51
|
|
We have employed each of the individuals in the foregoing table
other than Mr. Gregoire for more than five years.
Mr. Gregoire joined us on April 25, 2007 as Vice
President and Chief Financial Officer. Previously, he was
employed by Infor Global Solutions, Inc., an international
software company, as Vice President of Finance since 2006 with
responsibility for its Datastream Systems and Customer
Relationship Management division. Mr. Gregoire previously
served as Corporate Controller of Datastream Systems Inc., a
software company, from 2005 until it was acquired by Infor
Global Solutions, Inc. in March 2006. From 2001 to 2005,
Mr. Gregoire served as Director of Accounting and Financial
Analysis of Paymentech, L.P., an international credit card
processing company.
19
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
|
The following table sets forth, for the periods indicated, the
range of high and low prices of our common stock,
$0.001 par value, as quoted on The NASDAQ Global Market.
Our common stock trades under the symbol TDSC.
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Period
|
|
High
|
|
|
Low
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
15.97
|
|
|
$
|
12.57
|
|
Second Quarter
|
|
$
|
15.90
|
|
|
$
|
8.55
|
|
Third Quarter
|
|
$
|
15.03
|
|
|
$
|
8.23
|
|
Fourth Quarter
|
|
$
|
14.00
|
|
|
$
|
5.97
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
8.27
|
|
|
$
|
3.76
|
|
Second Quarter
|
|
$
|
8.00
|
|
|
$
|
5.92
|
|
Third Quarter
|
|
$
|
10.71
|
|
|
$
|
6.40
|
|
Fourth Quarter
|
|
$
|
11.92
|
|
|
$
|
8.14
|
|
As of February 12, 2010, our outstanding common stock was
held by approximately 337 stockholders.
Dividends
We do not currently pay, and have not paid, any dividends on our
common stock, and we currently intend to retain any future
earnings for use in our business. Any future determination as to
the declaration of dividends on our common stock will be made at
the discretion of the Board of Directors and will depend on our
earnings, operating and financial condition, capital
requirements and other factors deemed relevant by the Board of
Directors, including the applicable requirements of the Delaware
General Corporation Law, which provides that dividends are
payable only out of surplus or current net profits.
The payment of dividends on our common stock may be restricted
by the provisions of credit agreements or other financing
documents that we may enter into or the terms of securities that
we may issue from time to time.
Issuer
Purchases of Equity Securities
We did not repurchase any of our equity securities during the
fourth quarter of 2009, except for unvested restricted stock
awards repurchased pursuant to our 2004 Incentive Stock Plan.
See Note 14 to the Consolidated Financial Statements.
20
Stock
Performance Graph
The graph below shows, for the five years ended
December 31, 2009, the cumulative total return on an
investment of $100 assumed to have been made on
December 31, 2004 in our common stock. For purposes of the
graph, cumulative total return assumes the reinvestment of all
dividends. The graph compares such return with those of
comparable investments assumed to have been made on the same
date in (a) the NASDAQ Composite Total Returns
Index and (b) the S & P Information Technology
Index, which are published market indices with which we are
sometimes compared.
Although total return for the assumed investment assumes the
reinvestment of all dividends on December 31 of the year in
which such dividends were paid, we paid no cash dividends on our
common stock during the periods presented.
Our common stock is quoted on The NASDAQ Global Market (trading
symbol: TDSC).
COMPARISON
OF 5-YEAR
CUMULATIVE TOTAL RETURN*
Assumes Initial Investment of $100
December 2009
|
|
* |
$100 invested on 12/31/04 in stock or index-including
reinvestment of dividends. Fiscal year ending December 31.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/04
|
|
|
12/05
|
|
|
12/06
|
|
|
12/07
|
|
|
12/08
|
|
|
12/09
|
3D Systems Corporation
|
|
|
|
100.00
|
|
|
|
|
90.54
|
|
|
|
|
80.26
|
|
|
|
|
77.65
|
|
|
|
|
39.93
|
|
|
|
|
56.83
|
|
NASDAQ Composite Total Returns Index
|
|
|
|
100.00
|
|
|
|
|
102.12
|
|
|
|
|
112.73
|
|
|
|
|
124.73
|
|
|
|
|
74.87
|
|
|
|
|
108.83
|
|
S & P Information Technology Index
|
|
|
|
100.00
|
|
|
|
|
101.01
|
|
|
|
|
109.51
|
|
|
|
|
127.36
|
|
|
|
|
72.41
|
|
|
|
|
117.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
Item 6.
|
Selected
Financial Data.
|
The selected consolidated financial data set forth below for the
five years ended December 31, 2009 has been derived from
our historical consolidated financial statements. You should
read this information together with Managements Discussion
and Analysis of Financial Condition and Results of Operations,
the notes to the selected consolidated financial data, and our
consolidated financial statements and the notes thereto for
December 31, 2009 and prior years included in this
Form 10-K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005(1)
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Consolidated Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Systems and other products
|
|
$
|
30,501
|
|
|
$
|
41,323
|
|
|
$
|
58,178
|
|
|
$
|
46,463
|
|
|
$
|
55,133
|
|
Materials
|
|
|
50,297
|
|
|
|
62,290
|
|
|
|
61,969
|
|
|
|
52,062
|
|
|
|
44,648
|
|
Services
|
|
|
32,037
|
|
|
|
35,327
|
|
|
|
36,369
|
|
|
|
36,295
|
|
|
|
39,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
112,835
|
|
|
|
138,940
|
|
|
|
156,516
|
|
|
|
134,820
|
|
|
|
139,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit(2)
|
|
|
49,730
|
|
|
|
55,568
|
|
|
|
63,412
|
|
|
|
46,315
|
|
|
|
62,916
|
|
Income (loss) from operations(2)
|
|
|
3,073
|
|
|
|
(5,490
|
)
|
|
|
(5,177
|
)
|
|
|
(25,633
|
)
|
|
|
9,169
|
|
Net income (loss)(3)
|
|
|
1,066
|
|
|
|
(6,154
|
)
|
|
|
(6,740
|
)
|
|
|
(29,280
|
)
|
|
|
9,406
|
|
Series B convertible preferred stock dividends(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,414
|
|
|
|
1,679
|
|
Net income (loss) available to common stockholders
|
|
|
1,066
|
|
|
|
(6,154
|
)
|
|
|
(6,740
|
)
|
|
|
(30,694
|
)
|
|
|
7,727
|
|
Net income (loss) available to common stockholders per share(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.05
|
|
|
$
|
(0.28
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(1.77
|
)
|
|
$
|
0.52
|
|
Diluted
|
|
$
|
0.05
|
|
|
$
|
(0.28
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(1.77
|
)
|
|
$
|
0.48
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
36,718
|
|
|
$
|
35,279
|
|
|
$
|
40,906
|
|
|
$
|
17,335
|
|
|
$
|
43,809
|
|
Total assets
|
|
|
150,403
|
|
|
|
153,002
|
|
|
|
167,385
|
|
|
|
166,194
|
|
|
|
153,800
|
|
Current portion of long-term debt and capitalized lease
obligations
|
|
|
213
|
|
|
|
3,280
|
|
|
|
3,506
|
|
|
|
11,913
|
|
|
|
200
|
|
Long-term debt and capitalized lease obligations, less current
portion
|
|
|
8,254
|
|
|
|
8,467
|
|
|
|
8,663
|
|
|
|
24,198
|
|
|
|
26,149
|
|
Series B convertible preferred stock(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,242
|
|
Total stockholders equity
|
|
|
104,697
|
|
|
|
102,234
|
|
|
|
104,769
|
|
|
|
69,669
|
|
|
|
70,212
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
5,886
|
|
|
|
6,676
|
|
|
|
6,970
|
|
|
|
6,529
|
|
|
|
5,926
|
|
Interest expense
|
|
|
618
|
|
|
|
918
|
|
|
|
1,830
|
|
|
|
1,645
|
|
|
|
1,775
|
|
Capital expenditures(5)
|
|
|
974
|
|
|
|
5,811
|
|
|
|
946
|
|
|
|
10,100
|
|
|
|
2,516
|
|
|
|
|
(1) |
|
We restated our 2005 financial statements during 2006 as a
result of our identification of errors in the financial
statements. |
22
The effect of these restatements on our operating results for
the year ended December 31, 2005 was as follows (in
thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2005
|
|
|
As Previously
|
|
|
|
|
|
|
Reported
|
|
Adjustments
|
|
Restated
|
|
|
(In thousands, except per share amounts)
|
|
Consolidated revenue
|
|
$
|
139,670
|
|
|
$
|
(592
|
)
|
|
$
|
139,078
|
|
Net income
|
|
$
|
10,083
|
|
|
$
|
(677
|
)
|
|
$
|
9,406
|
|
Net income (loss) per share available to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.56
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.52
|
|
Diluted
|
|
$
|
0.53
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.48
|
|
|
|
|
|
|
We corrected an error related to the manner in which we recorded
and maintained goodwill related to the acquisition in 2001 of
our Swiss subsidiary, 3D Systems S.A. Neither this error nor its
correction had any effect on net income (loss) reported for any
period on our Consolidated Statements of Operations. As a result
of the correction of this error, at December 31, 2006, our
Consolidated Balance Sheet reflects a $1,822 cumulative net
increase in goodwill and a corresponding cumulative net increase
in other comprehensive income (loss), together with appropriate
adjustments to stockholders equity, arising from foreign
currency translation related to such goodwill in each year ended
on or before December 31, 2006. Such net increase in other
comprehensive income (loss) consists of a $969 decrease for the
year ended December 31, 2005 and a $498 increase for the
year ended December 31, 2006. |
|
(2) |
|
To conform to current year presentation, foreign exchange gain
(loss) was reclassified for 2008 and prior years from product
cost of sales to interest and other expenses, net. The amount of
foreign exchange gain (loss) that was reclassified for each year
is as follows: $401 in 2008, $48 in 2007, $(58) in 2006 and
$(754) in 2005. This had the effect of decreasing gross profit
and income (loss) from operations in 2008 and 2007 and
increasing gross profit and income (loss) from operations in
2006 and 2005 by the respective amounts. |
|
(3) |
|
Our net loss for 2008 included a $1,185 tax benefit arising from
the settlement of a tax audit for the years 2000 through 2005
with a foreign tax authority. This tax settlement reduced 2008
income tax expense by $1,185 as amounts owing under the
settlement were less than amounts previously estimated. The
settlement enabled us to recognize foreign tax loss
carry-forwards, resulting in a $911 increase in our foreign
deferred tax asset. Net income in 2005 included a $2,500
non-cash benefit arising from the reduction of the valuation
allowance that we maintain against our deferred income tax
assets. In 2006, however, we recorded a $2,500 valuation
allowance against this deferred income tax asset (before giving
effect to the benefit of $748 of foreign net deferred income tax
assets that we recognized in 2006) that had the effect of
reversing the 2005 reduction of our valuation allowance as a
result of our determination that it was more likely than not
that we would not be able to utilize this deferred income tax
asset to offset anticipated U.S. income. |
|
(4) |
|
On June 8, 2006, all of our then outstanding Series B
Convertible Preferred Stock was converted by its holders into
2,639,772 shares of common stock, including
23,256 shares of common stock covering accrued and unpaid
dividends to June 8, 2006. As a consequence of the
conversion of the Series B Convertible Preferred Stock,
commencing with the third quarter of 2006, we ceased recording
dividends with respect to the outstanding Series B
Convertible Preferred Stock that we paid from its original
issuance in May 2003 until its full conversion in June 2006. |
|
(5) |
|
Excludes capital lease additions. |
23
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations.
|
The following discussion and analysis should be read together
with the selected consolidated financial data and our
consolidated financial statements set forth in this
Form 10-K.
Certain statements contained in this discussion may constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements
involve a number of risks, uncertainties and other factors that
could cause actual results to differ materially from those
reflected in forward-looking statements, as discussed more fully
in this
Form 10-K.
See Forward-Looking Statements and Cautionary
Statements and Risk Factors in Item 1A.
The forward-looking information set forth in this
Form 10-K
is provided as of the date of this filing, and, except as
required by law, we undertake no duty to update that information.
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. Our products and materials help to greatly
reduce the time and cost required to produce prototypes or
customized production parts. In 2009, with the introduction of
our
3Dpropartstm
service, we began supplying finished parts to our customers
through a network of parts printing service locations. 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 and parts
to our customers. Revenue from our
3Dpropartstm
service is included in the service revenue line in our
consolidated financial statements.
Growth
strategy
We are continuing to pursue a growth strategy that focuses on
seven strategic initiatives:
|
|
|
|
|
Improving our customers bottom line;
|
|
|
|
Developing significant product applications;
|
|
|
|
Expanding our range of customer services;
|
|
|
|
Accelerating new product development;
|
|
|
|
Optimizing cash flow and supply chain;
|
|
|
|
Creating a performance-based ethical culture; and
|
|
|
|
Developing people and opportunities.
|
Improving our customers bottom line. We
believe that our success depends on the success of our
customers. Understanding our customers objectives and
businesses should enable us to quickly incorporate their needs
into our product offerings and to offer them effective solutions
to their business needs. By offering them effective solutions to
their needs, we should be able to provide them with solutions
that significantly improve their own profitability.
Developing significant product
applications. We believe that our ability to
focus on industries that provide significant growth
opportunities enables us to accelerate the adoption of our
business solutions and to create significant new applications
for a continually expanding customer base. By focusing our
efforts on two significant addressable opportunities,
3-D printing
and Rapid Manufacturing, we are working to build a business
model that can provide sustained growth. Pursuing these market
opportunities also complements our strategy to increase, as a
percent of total revenue, the amount of revenue we derive from
materials and other consumables. Our materials are used in these
systems and provide a recurring revenue stream, which should be
less sensitive to cyclical economic behavior.
Expanding our range of customer services. We
believe that improving our customers bottom line demands
the creation of new and innovative services designed to meet
specific customer needs. We are
24
working to establish faster, simpler business practices designed
to make our customer experience with us easier and friendlier.
Accelerating new product development. We
believe that our growth depends on our ability to bring to
market new materials, systems and services through quick and
targeted development cycles. Technology and innovation are at
the heart of this initiative. As an industry leader, we believe
that the only sure way to sustain growth is through our
commitment to technological leadership.
Optimizing cash flow and supply chain. We
believe that our profitability, competitiveness and cash flow
should be enhanced by our ability to optimize our overall
manufacturing operations and supply chain. Through the
implementation of lean
order-to-cash
operations, coupled with selective strategic outsourcing, we are
working to derive tangible operating improvements and to improve
our overall return on assets.
Creating a performance-based ethical
culture. We believe that the success of our
strategic initiatives will depend on our ability to execute them
within the framework of a performance-based culture dedicated to
meeting the needs of our customers, stockholders and other
constituencies, supported by a corporate culture that is
committed to strong principles of business ethics and compliance
with the law. We recognize the need to align our performance
with our organizational capabilities and practices and our
strategic vision to enable us to grow at the rate we expect, to
drive operating improvements at the rate we expect and to make
the progress against targets necessary to create the necessary
alignment.
Developing people and opportunities. We
believe that our success depends heavily on the skill and
motivation of our employees and that we must therefore invest in
the skills that our employees possess and in those that we need
to accomplish our strategic initiatives.
We intend to accomplish this growth organically and, as
opportunities present themselves, through selective
acquisitions. As with any growth strategy, there can be no
assurance that we will succeed in accomplishing our strategic
initiatives.
Summary
of 2009 Financial Results
As discussed in greater detail below, revenue for 2009 declined
primarily due to lower sales across all revenue categories. Our
revenue decreased by 18.8% to $112.8 million in 2009 from
$138.9 million in 2008, after having decreased from
$156.5 million in 2007. These results largely reflected the
recessionary business conditions that became apparent in 2008
and continued throughout 2009.
Our gross profit for 2009 decreased by 10.5% to
$49.7 million from $55.6 million in 2008. Our lower
gross profit for 2009 arose primarily from a lower volume of
systems and materials sales. Costs associated with the initial
commercialization of our
V-Flash®
Desktop Printer also negatively affected our gross margin. These
negative impacts were partially offset by supply chain
efficiencies and productivity improvements. Gross profit was
also favorably affected by higher service margins due to systems
upgrades and improved margins on maintenance contracts. Our
gross margin percentage improved to 44.1% in 2009 from 40.0% in
2008.
Our total operating expenses declined by $14.4 million in
2009 from 2008, reflecting lower SG&A and R&D
expenses, reflecting the strategic actions that we have taken to
reshape our organization. We expect to continue to manage
expenses and drive down our costs where possible without
impairing our ability to operate and service our customers. We
expect operating expenses for 2010 to fall in the range of
$46 million to $52 million.
For 2009, our operating income improved by $8.6 million to
$3.1 million compared to an operating loss of
$5.5 million in 2008. This was primarily due to lower total
operating expenses and the increase in our gross margin noted
above.
Our operating income for 2009 included $8.5 million of
non-cash expenses, which primarily consisted of depreciation and
amortization, stock-based compensation and the provision for bad
debts; this compared to $8.9 million of non-cash expenses
in 2008.
25
A number of actions or events occurred in 2009 that affected our
liquidity and our balance sheet including the following:
|
|
|
|
|
We used $2.0 million of the $3.5 million of cash
proceeds from the 2008 sale of our Grand Junction facility,
together with $1.2 million of pre-existing restricted cash,
to redeem the remaining $3.1 million of outstanding
industrial development bonds in January 2009. With the
redemption of these bonds, we have no outstanding indebtedness
for borrowed money;
|
|
|
|
During the second half of 2009, we used $4.1 million of
cash to acquire three businesses to augment our
3-D printing
and
3Dpropartstm
service. See Liquidity and Capital Resources
Cash Flow-Cash Flow from Investing Activities;
|
|
|
|
Our unrestricted cash and cash equivalents increased by
$2.7 million to $24.9 million at December 31,
2009 from $22.2 million at December 31, 2008;
|
|
|
|
As discussed below, our working capital increased by
$1.4 million from December 31, 2008 to
December 31, 2009. See Liquidity and Capital
Resources Working capital below; and
|
|
|
|
Among other major components of working capital, accounts
receivable, net of allowances, declined by $1.5 million
from December 31, 2008 to December 31, 2009 primarily
reflecting our lower sales in 2009. Inventory at
December 31, 2009 was $2.6 million lower than its
December 31, 2008 level, reflecting lower sales and
operational efficiencies implemented in our supply chain and
logistics area.
|
Based upon current economic conditions, we expect 2010 to
continue to be challenging. Softness in demand in key industries
we serve may result in a continued decline in revenue from our
Direct Rapid Manufacturing systems during the next several
quarters. As previously disclosed, in connection with our
commercialization of our
V-Flash®
Desktop Printer in the second quarter of 2009, we expect our
earnings per share to be negatively impacted in the range of
$0.02 to $0.04 per share for each of the initial four quarters
of commercial activity.
Results
of Operations for 2009, 2008 and 2007
Table 1 below sets forth revenue and percentage of revenue by
class of product and service.
Table
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in thousands)
|
|
|
Systems and other products
|
|
$
|
30,501
|
|
|
|
27.0
|
%
|
|
$
|
41,323
|
|
|
|
29.8
|
%
|
|
$
|
58,178
|
|
|
|
37.2
|
%
|
Materials
|
|
|
50,297
|
|
|
|
44.6
|
|
|
|
62,290
|
|
|
|
44.8
|
|
|
|
61,969
|
|
|
|
39.6
|
|
Services
|
|
|
32,037
|
|
|
|
28.4
|
|
|
|
35,327
|
|
|
|
25.4
|
|
|
|
36,369
|
|
|
|
23.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
112,835
|
|
|
|
100.0
|
%
|
|
$
|
138,940
|
|
|
|
100.0
|
%
|
|
$
|
156,516
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
revenue
Consolidated revenue decreased in both 2009 and 2008 due
primarily to decreased volume across all sales categories as a
result of weakened economic conditions. These decreases are
explained in more detail in the Revenue by class of product
and service and Revenue by geographic region sections
below.
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 long lead times.
Due to the relatively high list prices 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 for a
particular period. Revenue
26
reported for systems sales in any particular period is also
affected by revenue recognition rules prescribed by generally
accepted accounting principles.
Backlog has historically not been a significant factor in our
business, reflecting our relatively short production and
delivery lead times. We had approximately $1.4 million of
booked orders outstanding at December 31, 2009, of which
$0.5 million was related to
3-D
printers. We expect to ship all of these orders in 2010. At
December 31, 2008 and 2007, respectively, our backlog was
approximately $1.4 million and $3.1 million.
Revenue
by class of product and service
2009
compared to 2008
Sales volumes of new products and services declined by
$11.8 million in 2009, while the volume of legacy products
sold declined by $2.5 million compared to 2008. Table 2
sets forth our change in revenue by class of product and service
for 2009 compared to 2008:
Table
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Systems and Other Products
|
|
|
Materials
|
|
|
Services
|
|
|
Totals
|
|
|
|
(Dollars in thousands)
|
|
|
2008 Revenue
|
|
$
|
41,323
|
|
|
|
29.8
|
%
|
|
$
|
62,290
|
|
|
|
44.8
|
%
|
|
$
|
35,327
|
|
|
|
25.4
|
%
|
|
$
|
138,940
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core products and services
|
|
|
164
|
|
|
|
0.4
|
|
|
|
(2,499
|
)
|
|
|
(4.0
|
)
|
|
|
(159
|
)
|
|
|
(0.4
|
)
|
|
|
(2,494
|
)
|
|
|
(1.8
|
)
|
New products and services
|
|
|
(1,821
|
)
|
|
|
(4.4
|
)
|
|
|
(7,770
|
)
|
|
|
(12.5
|
)
|
|
|
(2,174
|
)
|
|
|
(6.2
|
)
|
|
|
(11,765
|
)
|
|
|
(8.5
|
)
|
Price/Mix
|
|
|
(7,308
|
)
|
|
|
(17.7
|
)
|
|
|
(592
|
)
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
|
|
|
|
(7,900
|
)
|
|
|
(5.7
|
)
|
Foreign currency translation
|
|
|
(1,857
|
)
|
|
|
(4.5
|
)
|
|
|
(1,132
|
)
|
|
|
(1.8
|
)
|
|
|
(957
|
)
|
|
|
(2.7
|
)
|
|
|
(3,946
|
)
|
|
|
(2.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change
|
|
|
(10,822
|
)
|
|
|
(26.2
|
)
|
|
|
(11,993
|
)
|
|
|
(19.3
|
)
|
|
|
(3,290
|
)
|
|
|
(9.3
|
)
|
|
|
(26,105
|
)
|
|
|
(18.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Revenue
|
|
$
|
30,501
|
|
|
|
27.0
|
%
|
|
$
|
50,297
|
|
|
|
44.6
|
%
|
|
$
|
32,037
|
|
|
|
28.4
|
%
|
|
$
|
112,835
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We earn revenue from the sales of systems and other products,
materials and services. On a consolidated basis, revenue for
2009 decreased by 18.8% to $112.8 million from
$138.9 million for 2008 as a result of lower volume and a
shift in price/mix of systems and other products related to
lower levels of large-frame system sales, all of which we
believe is reflective of the continued weak global economic
conditions during 2009.
The decline in revenue from systems and other products that is
due to volume for 2009 compared to 2008 was primarily the result
of lower sales of large-frame and mid-frame systems that were
only partially offset by an increase in unit volume of
3-D
printers. Sales of systems consisted of:
|
|
|
|
|
Large-frame systems, which represented 32% of total systems
revenue for 2009, compared to 36% in 2008;
|
|
|
|
Mid-frame and small-frame systems, which accounted for 29% of
total systems revenue for 2009, compared to 42% in 2008; and
|
|
|
|
3-D
printers, which made up the remaining 39%, increasing from 22%
in 2008.
|
Due to the relatively high list price of certain systems, our
customers purchasing decisions may have long lead times;
combined with 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
27
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.
Revenue from materials was also adversely impacted by lower
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.
Sales of integrated materials represented 31% of total materials
revenue in 2009, compared to 26% in 2008. After bottoming at
$10.6 million in the first quarter of 2009, materials
revenue increased sequentially each subsequent quarter of 2009
to end the fourth quarter at $14.8 million.
The decrease in services revenue reflects a reduction in
maintenance revenue and the trailing
12-month
cumulative impact of the decline in large-frame systems sales on
warranty revenue. The decrease was partially offset by an
increase in sales of upgrades and sales from our
3Dpropartstm
service, which we introduced in October 2009. Services revenue
increased 12.1% sequentially during the fourth quarter of 2009.
In addition to changes in sales volumes, there are two other
primary drivers of changes in revenue from one period to
another: the combined effect of changes in product mix and
average selling prices, sometimes referred to as price and mix
effects, and the impact of fluctuations in foreign currencies.
As used in this Managements Discussion and Analysis, the
price and mix effects relate 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.
2008
compared to 2007
As shown in Table 3, the $17.6 million decrease in
consolidated revenue in 2008 compared to 2007 reflects the
effect of a $16.9 million decrease in systems revenue and a
$1.0 million decrease in services revenue in 2008. Sales of
new products and services introduced within the last three years
decreased by $19.4 million in 2008. Unit sales volume of
legacy products declined by $2.3 million in 2008. Favorable
price/mix effects increased revenue by $0.3 million and
favorable foreign currency translation effects increased by
$3.9 million.
Table
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Systems and
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Products
|
|
|
Materials
|
|
|
Services
|
|
|
Totals
|
|
|
|
(Dollars in thousands)
|
|
|
2007 Revenue
|
|
$
|
58,178
|
|
|
|
37.2
|
%
|
|
$
|
61,969
|
|
|
|
39.6
|
%
|
|
$
|
36,369
|
|
|
|
23.2
|
%
|
|
$
|
156,516
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core products and services
|
|
|
(2,090
|
)
|
|
|
(3.6
|
)
|
|
|
(559
|
)
|
|
|
(0.9
|
)
|
|
|
333
|
|
|
|
0.9
|
|
|
|
(2,316
|
)
|
|
|
(1.5
|
)
|
New products and services
|
|
|
(16,140
|
)
|
|
|
(27.7
|
)
|
|
|
(883
|
)
|
|
|
(1.4
|
)
|
|
|
(2,375
|
)
|
|
|
(6.5
|
)
|
|
|
(19,398
|
)
|
|
|
(12.4
|
)
|
Price/Mix
|
|
|
433
|
|
|
|
0.7
|
|
|
|
(159
|
)
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
274
|
|
|
|
0.2
|
|
Foreign currency translation
|
|
|
942
|
|
|
|
1.6
|
|
|
|
1,922
|
|
|
|
3.1
|
|
|
|
1,000
|
|
|
|
2.7
|
|
|
|
3,864
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change
|
|
|
(16,855
|
)
|
|
|
(29.0
|
)
|
|
|
321
|
|
|
|
0.5
|
|
|
|
(1,042
|
)
|
|
|
(2.9
|
)
|
|
|
(17,576
|
)
|
|
|
(11.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Revenue
|
|
$
|
41,323
|
|
|
|
29.8
|
%
|
|
$
|
62,290
|
|
|
|
44.8
|
%
|
|
$
|
35,327
|
|
|
|
25.4
|
%
|
|
$
|
138,940
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
As set forth in Table 1 and Table 3:
|
|
|
|
|
Revenue from systems and other products decreased by
$16.9 million or 29.0% to $41.3 million for 2008 from
$58.2 million for 2007 and decreased to 29.7% of
consolidated revenue in 2008 from 37.2% in 2007.
|
This decrease was derived primarily from an $18.2 million
decrease in sales of large-frame systems, which we believe is
due to overall weak economic conditions, partially offset by a
$1.0 million positive impact from foreign currency
translation.
|
|
|
|
|
Revenue from materials increased by $0.3 million or 0.5% to
$62.3 million for 2008 from $62.0 million for 2007, as
favorable foreign currency translation offset the lower sales
resulting from the recessionary business conditions in 2008.
Materials revenue increased to 44.8% of consolidated revenue in
2008 from 39.6% in 2007. In 2008, our integrated systems
accounted for 26% of all materials revenue. We believe our
integrated material strategy is taking hold, evidenced by the
sequential quarterly increase in integrated material sales (as a
percentage of total sales) from 22% in the first quarter of 2008
and increasing to 28% in the fourth quarter of 2008.
|
|
|
|
Materials revenue volume from our legacy products and new
products decreased $0.6 million and $0.9 million,
respectively. The combined effect of product mix and average
selling prices decreased by $0.2 million. Foreign currency
translation had a $1.9 million positive impact on materials
revenue.
|
|
|
|
Revenue from services declined by $1.0 million for 2008
compared to 2007 and increased to 25.4% of consolidated revenue
in 2008 from 23.2% in 2007 reflecting the effect of the decline
in revenue from systems in 2008.
|
Declines in volume of new services in 2008 reflected the impact
of lower systems revenue partially offset by a $0.3 million
increase in legacy services and the $1.0 million favorable
impact of foreign currency translation on service revenue.
Revenue
by geographic region
2009
compared to 2008
Each geographic region experienced lower levels of revenue in
2009 compared to 2008. This was principally caused by continued
weak economic conditions in 2009 which we believe led to lower
levels of large-frame system sales, and in the case of Europe,
the impact of volatility in currencies on foreign currency
translation. Table 4 sets forth the change in revenue by
geographic area for 2009 compared to 2008:
Table
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
Europe
|
|
|
Asia-Pacific
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
2008 Revenue
|
|
$
|
54,766
|
|
|
|
39.4
|
%
|
|
$
|
62,114
|
|
|
|
44.7
|
%
|
|
$
|
22,060
|
|
|
|
15.9
|
%
|
|
$
|
138,940
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
(2,433
|
)
|
|
|
(4.4
|
)
|
|
|
(4,592
|
)
|
|
|
(7.4
|
)
|
|
|
(7,234
|
)
|
|
|
(32.8
|
)
|
|
|
(14,259
|
)
|
|
|
(10.3
|
)
|
Price/Mix
|
|
|
(3,416
|
)
|
|
|
(6.2
|
)
|
|
|
(4,039
|
)
|
|
|
(6.5
|
)
|
|
|
(445
|
)
|
|
|
(2.0
|
)
|
|
|
(7,900
|
)
|
|
|
(5.7
|
)
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
(4,743
|
)
|
|
|
(7.6
|
)
|
|
|
797
|
|
|
|
3.6
|
|
|
|
(3,946
|
)
|
|
|
(2.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change
|
|
|
(5,849
|
)
|
|
|
(10.6
|
)
|
|
|
(13,374
|
)
|
|
|
(21.5
|
)
|
|
|
(6,882
|
)
|
|
|
(31.2
|
)
|
|
|
(26,105
|
)
|
|
|
(18.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Revenue
|
|
$
|
48,917
|
|
|
|
43.4
|
%
|
|
$
|
48,740
|
|
|
|
43.2
|
%
|
|
$
|
15,178
|
|
|
|
13.4
|
%
|
|
$
|
112,835
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As shown in Table 4:
|
|
|
|
|
Revenue from U.S. operations decreased by $5.8 million
or 10.6% in 2009 to $48.9 million from $54.8 million
in 2008. This decrease was due primarily to lower volume and the
unfavorable combined effect of price and mix.
|
29
|
|
|
|
|
Revenue from
non-U.S. operations
decreased by $20.3 million or 24.1% to $63.9 million
in 2009 from $84.2 million in 2008 and comprised 56.6% of
consolidated revenue in 2009 compared to 60.6% in 2008. The
decline in
non-U.S. revenue,
excluding the impact of foreign currency translation, was 19.4%
in 2009.
|
|
|
|
Revenue from European operations decreased by $13.4 million
or 21.5% to $48.7 million in 2009 from $62.1 million
in 2008. This decrease was due to a $4.6 million decline in
volume, the $4.7 million unfavorable effect of foreign
currency translation as the U.S. dollar strengthened
against the Euro and British Pound, and the $4.0 million
combined unfavorable impact of price/mix.
|
|
|
|
Revenue from Asia-Pacific operations decreased by
$6.9 million or 31.2% to $15.2 million in 2009 from
$22.1 million in 2008. This decrease was caused primarily
by a $7.7 million decline in volume, price and mix as sales
were adversely affected by the previously disclosed
reorganization filing of our largest Japanese customer. The
sales decline was partially offset by $0.8 million of
favorable foreign currency translation in the Asia-Pacific
region.
|
2008
compared to 2007
The United States and Europe contributed to our lower level of
revenue in 2008, while Asia-Pacific revenue declined by a
relatively modest $0.1 million compared to 2007.
Table 5 sets forth the change in revenue by geographic area for
2008 compared to 2007:
Table
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
Europe
|
|
|
Asia-Pacific
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
2007 Revenue
|
|
$
|
65,502
|
|
|
|
41.8
|
%
|
|
$
|
68,820
|
|
|
|
44.0
|
%
|
|
$
|
22,194
|
|
|
|
14.2
|
%
|
|
$
|
156,516
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
(11,156
|
)
|
|
|
(17.0
|
)
|
|
|
(9,153
|
)
|
|
|
(13.3
|
)
|
|
|
(1,405
|
)
|
|
|
(6.3
|
)
|
|
|
(21,714
|
)
|
|
|
(13.9
|
)
|
Price/Mix
|
|
|
420
|
|
|
|
0.6
|
|
|
|
536
|
|
|
|
0.8
|
|
|
|
(682
|
)
|
|
|
(3.1
|
)
|
|
|
274
|
|
|
|
0.2
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
1,911
|
|
|
|
2.8
|
|
|
|
1,953
|
|
|
|
8.8
|
|
|
|
3,864
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change
|
|
|
(10,736
|
)
|
|
|
(16.4
|
)
|
|
|
(6,706
|
)
|
|
|
(9.7
|
)
|
|
|
(134
|
)
|
|
|
(0.6
|
)
|
|
|
(17,576
|
)
|
|
|
(11.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Revenue
|
|
$
|
54,766
|
|
|
|
39.4
|
%
|
|
$
|
62,114
|
|
|
|
44.7
|
%
|
|
$
|
22,060
|
|
|
|
15.9
|
%
|
|
$
|
138,940
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As shown in Table 5:
|
|
|
|
|
Revenue from U.S. operations decreased by
$10.7 million or 16.4% in 2008 to $54.8 million from
$65.5 million in 2007.
|
This decrease was due primarily to lower volume of large-frame
system sales, for reasons discussed above, compared to that
which we experienced in 2007.
|
|
|
|
|
Revenue from operations outside the U.S. decreased by
$6.8 million or 7.5% to $84.2 million in 2008 from
$91.0 million in 2007 and comprised 60.6% of consolidated
revenue in 2008 compared to 58.2% in 2007.
|
Foreign currency translation partially offset our revenue
decrease in 2008. Excluding the $3.9 million favorable
effect of foreign currency translation, revenue from operations
outside the U.S. would have decreased 11.8% for 2008
compared to 2007 and would have been 59.5% of consolidated
revenue for 2008.
|
|
|
|
|
Revenue from European operations decreased by $6.7 million
or 9.7% to $62.1 million in 2008 from $68.8 million in
2007. This decrease was due primarily to the $9.1 million
of lower volume in 2008, partially offset by the favorable
effect of foreign currency translation and positive price/mix
variances.
|
30
|
|
|
|
|
Revenue from Asia-Pacific operations decreased by
$0.1 million or 0.6% to $22.1 million in 2008 from
$22.2 million in 2007. This decrease was caused primarily
by a $1.4 million decline in volume and a $0.7 million
unfavorable effect of price and mix, which more than fully
offset $2.0 million of favorable foreign currency
translation in the Asia-Pacific region.
|
Gross
profit and gross profit margins
Although gross profit decreased in both 2008 and 2009 as our
revenue decreased, our gross profit margin improved in 2009 as
shown in Table 6 below. On a consolidated basis, gross profit
for 2009 decreased by $5.9 million to $49.7 million
compared to $55.6 million and $63.4 million for 2008
and 2007, respectively:
Table
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Gross
|
|
|
%
|
|
|
Gross
|
|
|
%
|
|
|
Gross
|
|
|
%
|
|
|
|
Profit
|
|
|
Revenue
|
|
|
Profit
|
|
|
Revenue
|
|
|
Profit
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
Systems and other products
|
|
$
|
7,824
|
|
|
|
25.7
|
%
|
|
$
|
7,971
|
|
|
|
19.3
|
%
|
|
$
|
15,990
|
|
|
|
27.5
|
%
|
Materials
|
|
|
29,673
|
|
|
|
59.0
|
|
|
|
39,267
|
|
|
|
63.0
|
|
|
|
38,476
|
|
|
|
62.1
|
|
Services
|
|
|
12,233
|
|
|
|
38.2
|
|
|
|
8,330
|
|
|
|
23.6
|
|
|
|
8,946
|
|
|
|
24.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
49,730
|
|
|
|
44.1
|
%
|
|
$
|
55,568
|
|
|
|
40.0
|
%
|
|
$
|
63,412
|
|
|
|
40.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To conform to our 2009 presentation, we reclassified
$0.4 million of foreign exchange gain in 2008 and a nominal
amount of foreign exchange gain in 2007, which had previously
been included in product cost of sales, to interest and other
expense, net in our consolidated statements of operations. This
had the effect of decreasing our previously reported gross
profit and interest and other expense, net by $0.4 million
for 2008 and by a nominal amount in 2007. This also increased
the operating loss for those years by the same amount.
On a consolidated basis, gross profit for 2009 decreased by
$5.9 million to $49.7 million from $55.6 million
for 2008. This decrease is the result of lower volume of
material sales and lower large-frame systems revenue, partially
offset by operational efficiencies, as well as the previously
disclosed negative impact on margin of sales of our
V-Flash®
Desktop Printer. This decline was partially offset by higher
margins on services from systems upgrades and improved margins
on maintenance contracts.
Consolidated gross profit margin in 2009 increased by
4.1 percentage points to 44.1% of revenue from 40.0% of
revenue for the 2008 period. Countering the adverse impact of
our lower revenue, the increase in gross profit margin reflected
the effect of various cost savings initiatives that we pursued
in 2008 and 2009, which included certain supply chain
efficiencies, the movement of certain third-party logistics
activities in-house, the sale of systems upgrades and a
reduction in field service costs. The gross profit margin was
adversely affected by the previously disclosed negative impact
on margin of sales of our
V-Flash®
Desktop Printer.
Systems and other products gross profit declined by 1.8% to
$7.8 million in 2009 from $8.0 million in 2008, while
the gross profit margin improved by 6.4 percentage points
in 2009 to 25.7% of revenue. This improvement in gross profit
margin resulted from increased supply chain efficiencies and
lower costs to refurbish system components. The improvement was
partially offset by the decline in volume discussed above
resulting in the absorption of fixed costs over fewer units and
the previously disclosed negative impact on margin of
V-Flash®
Desktop Printer sales.
Gross profit margin for materials declined by 24.4% to
$29.7 million, with the gross profit margin decreasing
4.0 percentage points to 59.0% of revenue from 63.0% in
2008. This is primarily due to the decline in sales volume of
materials, which was adversely affected by the cumulative effect
of lower levels of large-frame system sales, resulting in
overhead absorption over lower revenue.
Gross profit for services increased by 46.9% to
$12.2 million compared to $8.3 million in 2008, while
the gross margin improved by 14.6 percentage points to
38.2% of revenue. The improved gross profit is due to the
31
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.
Operating
expenses
As shown in Table 7, total operating expenses decreased by
$14.4 million or 23.6% to $46.7 million for 2009 from
$61.1 million for 2008 and $68.6 million for 2007 as
cost savings initiatives that we initiated have gained traction.
This is evidenced by sequential declines in our
quarter-over-quarter
operating expenses in each of the last ten quarters. This
decrease consists of $10.4 million of lower selling,
general and administrative expenses and $4.1 million in
lower research and development expenses, both of which are
discussed below. Accordingly, we expect our SG&A expenses
in 2010 to fall into the range of $36 million to
$40 million, and our 2010 R&D expenses to fall in a
range of $10 million to $12 million without slowing
down the rate of planned new product introductions.
Table
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
%
|
|
|
|
|
|
%
|
|
|
|
|
|
%
|
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
Amount
|
|
|
Revenue
|
|
|
|
(Dollars in thousands)
|
|
|
SG&A
|
|
$
|
35,528
|
|
|
|
31.5
|
%
|
|
$
|
45,859
|
|
|
|
33.0
|
%
|
|
$
|
54,159
|
|
|
|
34.6
|
%
|
R&D
|
|
|
11,129
|
|
|
|
9.9
|
|
|
|
15,199
|
|
|
|
10.9
|
|
|
|
14,430
|
|
|
|
9.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
46,657
|
|
|
|
41.4
|
%
|
|
$
|
61,058
|
|
|
|
43.9
|
%
|
|
$
|
68,589
|
|
|
|
43.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general, and administrative costs
2009
compared to 2008
Selling, general and administrative expenses declined by
$10.4 million or 22.5% to $35.5 million in 2009 from
$45.9 million in 2008 after decreasing by $8.3 million
in 2008 compared to $54.2 million in 2007. Selling, general
and administrative expenses, as a percentage of revenue, were
31.5%, 33.0% and 34.6% in 2009, 2008 and 2007, respectively.
The $10.4 million decrease in selling, general and
administrative expenses in 2009 was primarily due to:
|
|
|
|
|
$4.8 million reduction in salary, benefits and contract
labor costs;
|
|
|
|
$2.2 million decline in audit, tax and other accounting
fees;
|
|
|
|
$0.9 million in reduced occupancy costs; and
|
|
|
|
$0.6 million of lower travel-related expenses,
|
|
|
|
partially offset by $1.3 million of increased litigation
costs.
|
2008
compared to 2007
Selling, general and administrative expenses declined by
$8.3 million or 15.3% to $45.9 million in 2008 from
$54.2 million in 2007. As a percentage of revenue, selling,
general and administrative expenses were 33.0% and 34.6% of
consolidated revenue in 2008 and 2007, respectively.
The $8.3 million decrease in selling, general and
administrative expenses in 2008 was primarily due to:
|
|
|
|
|
$3.5 million of lower contract labor and consultant costs;
|
|
|
|
$2.3 million decline in incentive and stock-based
compensation costs;
|
|
|
|
$1.2 million reduction in accounting fees;
|
32
|
|
|
|
|
$1.0 million of lower sales bonuses and commissions;
|
|
|
|
$0.7 million of reduced occupancy costs;
|
|
|
|
$0.5 million decrease in printing and supply costs; and
|
|
|
|
$0.4 million reduction in travel-related expenses.
|
Partially offsetting the decline were:
|
|
|
|
|
$0.7 million increase in bad debt expense, including the
provision related to a large Japanese customer that filed for
court protection in February 2009.
|
|
|
|
$0.6 million of expenses associated with the first quarter
Audit Committee investigation of anonymous claims of wrongdoing
by certain members of management, which claims were found to be
baseless.
|
Research
and development expenses
Research and development expenses decreased by 26.8% to
$11.1 million in 2009 and increased by 5.3% to
$15.2 million in 2008 from $14.4 million in 2007. The
decrease in 2009 was principally due to a $2.4 million
decrease in outside consulting services in 2009 and the
reduction in costs for 2009 following commercialization of
certain new products in 2008 including, among others, our
ProJettm
3-D
printers,
iProtm
SLA®
systems,
sProtm
SLS®
systems, the
V-Flash®
Desktop Printer and other new product development activities,
including the new products that we introduced in 2009.
Income
(loss) from operations
In 2009, we achieved operating income of $3.1 million,
compared to operating losses of $5.5 million in 2008 and
$5.2 million in 2007, including the effect of the 2009
reclassification of foreign exchange gain (loss) discussed
above, as our lower revenue and gross profit were more than
offset by our lower level of total operating expenses in 2009.
See Gross profit and gross profit margins above.
The following table sets forth operating income (loss) from
operations by geographic area for 2009, 2008 and 2007:
Table
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in thousands)
|
|
|
Income (loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
(2,478
|
)
|
|
$
|
(10,947
|
)
|
|
$
|
(9,820
|
)
|
Germany
|
|
|
234
|
|
|
|
1,350
|
|
|
|
507
|
|
Other Europe
|
|
|
1,316
|
|
|
|
2,793
|
|
|
|
1,192
|
|
Asia-Pacific
|
|
|
3,486
|
|
|
|
965
|
|
|
|
1,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
2,558
|
|
|
|
(5,839
|
)
|
|
|
(6,305
|
)
|
Inter-segment elimination
|
|
|
515
|
|
|
|
349
|
|
|
|
1,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,073
|
|
|
$
|
(5,490
|
)
|
|
$
|
(5,177
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On a geographic basis:
|
|
|
|
|
Our U.S. operations generated an operating loss of
$2.5 million in 2009, compared to $10.9 million in
2008. We reported $9.8 million of operating losses in the
U.S. in 2007.
|
|
|
|
Our income from operations in Europe decreased to
$1.6 million in 2009 from $4.1 million in 2008. We
reported $1.7 million of operating income in our European
operations in 2007.
|
33
|
|
|
|
|
Operating income from our Asia-Pacific operations was
$3.5 million in 2009 compared to $1.0 million in 2008.
We reported $1.8 million of operating income in our
Asia-Pacific operations in 2007.
|
With respect to the U.S., in 2009, 2008 and 2007, 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 of the U.S. are
conducted through sales and marketing subsidiaries, the changes
in operating income in our operations outside of the
U.S. in each of 2009, 2008 and 2007 resulted primarily from
changes in sales volume, transfer pricing and foreign currency
translation.
Interest
and other expenses, net
Interest and other expenses, net, which consist primarily of
interest income and interest expense, amounted to
$1.2 million of net expense for 2009, $0.4 million of
net expense for 2008 and $1.1 million of net expense for
2007. The 2009 increase resulted from lower interest income on
investments in 2009 as we shifted our short-term investments
into Treasury funds in September 2008, partially offset by
reduced interest expense related to the redemption of the
remaining outstanding industrial revenue bonds. The 2008
decrease resulted from interest income generated by higher
average cash balances in 2008 and lower interest expense due to
the absence in 2008 of bank borrowings and other outstanding
debt that we discharged in 2007, partially offset by lower
interest rates on investments that prevailed in 2008.
In December 2008, we completed the sale of our Grand Junction
facility for $5.5 million, which included $3.5 million
of cash (before closing costs) and a $2.0 million
non-interest bearing note receivable with a five-year maturity.
The carrying value of the facility was $3.5 million, and
after deducting certain closing costs, we realized an initial
gain on the sale of $1.6 million.
We discounted this note receivable by approximately
$1.0 million to reflect imputed interest, and offset this
amount against the initial gain, reducing the net gain to
$0.6 million. In accordance with ASC Section 360.20,
Real Estate Sales, we have recognized no gain on the
sale of our Grand Junction facility as of December 31,
2009. The carrying value of the long-term receivable, net of the
discount and deferred gain, is recorded in Other assets,
net on the balance sheet at December 31, 2009 and
2008. See Note 10 to the Consolidated Financial Statements.
We do not expect to incur additional borrowings during 2010, and
consequently expect that interest and other expense (income),
net will not be a material factor in our operating results
during 2010.
Provisions
for income taxes
We recorded $0.8 million, $0.3 million and
$0.5 million of provisions for income taxes in 2009, 2008
and 2007, respectively. In each year, these provisions primarily
reflect tax expense associated with income taxes in foreign
jurisdictions.
Our $0.8 million provision for income taxes in 2009
increased from 2008 principally due to the absence in 2009 of
the $1.2 million benefit in 2008 arising from the
settlement of a foreign tax audit for the years 2000 through
2005. The impact of the absence of this benefit is offset by a
$0.6 million decrease in tax expense due to the reduction
in foreign income.
Our $0.3 million provision for income taxes in 2008
included a $1.2 million benefit arising from the settlement
of a foreign tax audit for the years 2000 through 2005, as
amounts owing under the settlement were less than the amounts we
previously estimated. The settlement allowed us to recognize tax
loss carry-forwards, resulting in a $0.9 million increase
in our foreign deferred tax asset. The benefit of the favorable
tax settlement amounted to $0.05 per share. See Note 21 to
the Consolidated Financial Statements.
A substantial portion of our deferred income tax assets results
from available net operating loss carry-forwards in the
jurisdictions in which we operate. Certain of these net
operating loss carry-forwards for U.S. state income tax
purposes began to expire in 2006, and certain of them will begin
to expire in later years for foreign and U.S. federal
income tax purposes. See Note 21 to the Consolidated
Financial Statements. Our
34
level of U.S. losses for the years ended December 31,
2009, 2008 and 2007 may be viewed as evidence that we will
not be able to utilize all these net operating loss
carry-forwards before they expire.
Net
income (loss); net income (loss) available to 3D Systems common
stockholders
In 2009 we generated net income of $1.1 million, compared
to net losses of $6.2 million in 2008 and $6.7 million
in 2007.
The principal reasons for our higher net income in 2009, which
are discussed in more detail above, were:
|
|
|
|
|
The $14.4 million reduction in operating expenses;
partially offset by
|
|
|
|
The $5.9 million decrease in gross profit;
|
|
|
|
The $0.8 million increase in interest and other expense,
net; and
|
|
|
|
The $0.5 million increase in the provision for income taxes.
|
The principal reasons for our lower net loss in 2008, which are
discussed in more detail above, were:
|
|
|
|
|
The $0.2 million reduction in our income tax
provisions; and
|
|
|
|
The $0.7 million reduction of interest and other expense,
net.
|
Net income (loss) available to common stockholders was
$1.1 million for 2009, ($6.2) million for 2008 and
($6.7) million for 2007. On a per share basis, our basic
net income per share available to the common stockholders was
$0.05 in 2009, and our fully diluted net income per share
available to common stockholders was $0.05. This is an
improvement over our net loss per share available to the common
stockholders, on both a basic and fully diluted basis, of $0.28
per share in 2008 and $0.33 per share in 2007.
The dilutive effects of outstanding securities were excluded
from the calculation of diluted income per share in 2008 and
2007 as they would have been anti-dilutive, that is, they would
have increased net income per share or reduced net loss per
share. See Note 18 to the Consolidated Financial Statements.
Liquidity
and Capital Resources
During 2010, 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 continue to benefit us in 2010,
there can be no assurance in these uncertain economic times that
those actions will be sufficient. Following the redemption of
our remaining outstanding industrial development bonds in
January 2009, we had no outstanding debt for borrowed money, and
our principal contractual commitments consisted of the capital
leases on our Rock Hill facility, which are discussed in greater
detail below.
Working
capital
Our net working capital increased by $1.4 million to
$36.7 million at December 31, 2009 from
$35.3 million at December 31, 2008. Table 9 provides a
summary of the net changes in working capital items from
December 31, 2008 to December 31, 2009.
35
Table
9
|
|
|
|
|
|
|
Increase
|
|
|
|
(Decrease)
|
|
|
|
(Dollars in
|
|
|
|
thousands)
|
|
|
Working capital at December 31, 2008
|
|
$
|
35,279
|
|
Changes in current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
|
2,749
|
|
Accounts receivable, net of allowances
|
|
|
(1,517
|
)
|
Inventories, net of reserves
|
|
|
(2,640
|
)
|
Prepaid expenses and other current assets
|
|
|
814
|
|
Deferred income tax assets
|
|
|
(301
|
)
|
Restricted cash
|
|
|
(3,255
|
)
|
|
|
|
|
|
Total current assets
|
|
|
(4,150
|
)
|
Changes in current liabilities:
|
|
|
|
|
Current portion of long-term debt
|
|
|
(3,085
|
)
|
Current portion of capitalized lease obligation
|
|
|
18
|
|
Accounts payable
|
|
|
(4,139
|
)
|
Accrued liabilities
|
|
|
3,057
|
|
Customer deposits
|
|
|
(509
|
)
|
Deferred revenue
|
|
|
(931
|
)
|
|
|
|
|
|
Total current liabilities
|
|
|
(5,589
|
)
|
|
|
|
|
|
Net change in working capital
|
|
|
1,439
|
|
|
|
|
|
|
Working capital at December 31, 2009
|
|
$
|
36,718
|
|
|
|
|
|
|
Our unrestricted cash and cash equivalents increased by
$2.7 million to $24.9 million at December 31,
2009 from $22.2 million at December 31, 2008. This
increase resulted from the net of $7.7 million of cash
provided by operating activities, $5.2 million of cash used
in investing activities and $0.3 million of cash provided
by financing activities.
Accounts receivable, net decreased by $1.5 million to
$23.8 million at December 31, 2009 from
$25.3 million at December 31, 2008. This decline was
primarily attributable to lower sales and a decrease in days
sales outstanding to 60 days at December 31, 2009 from
66 days at December 31, 2008. Accounts receivable more
than 90 days past due was 5.9% of gross receivables at
December 31, 2009 and December 31, 2008.
Bad debt expense was $0.9 million for 2009 compared to
$0.8 million in 2008. This amount includes a provision for
the large Japanese customer who filed for reorganization in
February 2009. All amounts due from this customer, who emerged
from reorganization in late 2009, have been fully reserved as of
December 31, 2009. The overall bad debt expense was
positively affected by our focus on improving collections. Bad
debt expense totaled $0.1 million in 2007. Our allowance
for doubtful accounts declined to $1.8 million at
December 31, 2009 from $2.0 million at
December 31, 2008. This decline resulted primarily from the
write-down of uncollectible receivables and a reduction in
receivables over 90 days past due.
36
Components of inventories were as follows:
Table
10
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Raw materials
|
|
$
|
2,294
|
|
|
$
|
1,635
|
|
Inventory held by assemblers
|
|
|
|
|
|
|
34
|
|
Work in process
|
|
|
253
|
|
|
|
146
|
|
Finished goods and parts inventory
|
|
|
18,524
|
|
|
|
22,359
|
|
|
|
|
|
|
|
|
|
|
Total cost
|
|
|
21,071
|
|
|
|
24,174
|
|
Less: reserves
|
|
|
(2,693
|
)
|
|
|
(3,156
|
)
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
$
|
18,378
|
|
|
$
|
21,018
|
|
|
|
|
|
|
|
|
|
|
Inventories decreased by $2.6 million to $18.4 million
at December 31, 2009 from $21.0 million at
December 31, 2008. This decrease resulted primarily from a
$3.8 million reduction in finished goods inventory as a
result of our inventory reduction initiatives, partially offset
by an increase in inventory as we moved production of our
ProJettm
line of 3-D
printers in-house.
As shown in Table 10 above, with the outsourcing of
substantially all our large-frame and mid-frame 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 large-frame and mid-frame systems.
As a result, we generally no longer hold in inventory most parts
for large-frame and mid-frame systems production or
refurbishment.
In calculating inventory reserves, which declined to
$2.7 million at December 31, 2009 from
$3.2 million at December 31, 2008, we make an
assessment of spare parts that we hold in inventory and that we
expect to use over the expected life cycles of the related
systems, of inventory related to the blending of our engineered
materials and composites and of our ability to sell items that
are recorded in finished goods inventory.
The components of prepaid expenses and other current assets were:
Table
11
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Value added tax (VAT) and sales tax refunds
|
|
$
|
468
|
|
|
$
|
325
|
|
Non-trade receivables
|
|
|
111
|
|
|
|
35
|
|
Other
|
|
|
1,836
|
|
|
|
1,241
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,415
|
|
|
$
|
1,601
|
|
|
|
|
|
|
|
|
|
|
Our prepaid expenses and other current assets increased by
$0.8 million to $2.4 million at December 31, 2009
from $1.6 million at December 31, 2008. The non-trade
receivables shown in Table 11, the inventory held by assemblers
shown in Table 10 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 Consolidated
Balance Sheet relate to the accounting for our outsourcing
arrangements pursuant to ASC 470.40, Product Financing
Arrangements.
Accounts payable declined by $4.1 million to
$13.0 million at December 31, 2009 from
$17.1 million at December 31, 2008. The decline was
primarily due to lower payables that corresponded to lower cost
of sales in 2009 compared to 2008 and the impact of our
continuing cost reduction initiatives.
Customer deposits decreased by $0.5 million from
$1.1 million at December 31, 2008 to $0.6 million
at December 31, 2009 as a result of lower sales of systems
and other products in 2009. Deferred revenue decreased by
$0.9 million to $8.5 million at December 31, 2009
from $9.4 million at December 31, 2008 primarily due
to a net decrease in maintenance contracts, installation,
training and warranty revenue in 2009.
37
Accrued liabilities increased by $3.0 million to
$11.1 million at December 31, 2009 from
$8.1 million at December 31, 2008; this increase is
primarily due to higher accruals for employee bonuses and taxes.
The changes in 2009 that comprise the other components of
working capital not discussed above arose in the ordinary course
of business.
Differences between the amounts of working capital item changes
in the cash flow statement and the amounts of balance sheet
changes for those items are primarily the result of foreign
currency translation adjustments.
Cash
flow
Table 12 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 years ended December 31, 2009, 2008 and
2007.
Table
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in thousands)
|
|
|
Cash provided by (used in) operating activities
|
|
$
|
7,734
|
|
|
$
|
(3,479
|
)
|
|
$
|
2,625
|
|
Cash used in investing activities
|
|
|
(5,243
|
)
|
|
|
(2,654
|
)
|
|
|
(2,205
|
)
|
Cash provided by (used in) financing activities
|
|
|
273
|
|
|
|
(1,434
|
)
|
|
|
14,669
|
|
Effect of exchange rate changes on cash
|
|
|
(15
|
)
|
|
|
42
|
|
|
|
269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
2,749
|
|
|
$
|
(7,525
|
)
|
|
$
|
15,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We generated $2.7 million of net cash in 2009 and finished
the year with $24.9 million of unrestricted cash, compared
to $22.2 million of unrestricted cash at December 31,
2008. This included $7.7 million of cash generated from
operating activities, consisting of our $1.1 million net
income in 2009 and $8.5 million of non-cash charges that
were included in our net income, partially offset by
$1.9 million of cash consumed by net changes in operating
accounts. We also used $5.2 million of cash in investing
activities, and $0.3 million of cash was provided by
financing activities in 2009. See Working capital, Cash flow
and Outstanding debt and capitalized lease
obligations.
Cash flow
from operations
2009
compared to 2008
For the year ended December 31, 2009, we generated
$7.7 million of net cash from operating activities. This
change in cash primarily consisted of our $1.1 million net
income and $8.5 million of non-cash charges that were
included in our net income, partially offset by
$1.9 million of cash consumed by net changes in operating
accounts.
The principal changes in non-cash items that favorably affected
operating cash flow included $5.9 million of depreciation
and amortization expense, $1.2 million of stock-based
compensation expense and $0.9 million of bad debt expense.
Depreciation and amortization decreased to $5.9 million in
2009 from $6.7 million in 2008, which decreased from
$7.0 million in 2007. The decrease in depreciation and
amortization in 2009 was primarily due to lower levels of
capital expenditures. The decrease in depreciation and
amortization in 2008 was primarily due to the absence of
amortization for acquired technology, which was fully amortized
during 2007.
Changes in working capital that resulted in a source of cash
included the following:
|
|
|
|
|
a $2.4 million decrease in inventory; and
|
|
|
|
a $1.4 million decrease in accounts receivable.
|
38
Changes in working capital that resulted in a use of cash
included the following:
|
|
|
|
|
a $4.4 million decrease in accounts payable; and
|
|
|
|
a $1.1 million decrease in deferred revenue.
|
See Working capital above for a discussion of
the reasons for these changes in working capital items.
2008
compared to 2007
For the year ended December 31, 2008, we used
$3.5 million of net cash in operating activities. This
change in cash primarily consisted of our $6.2 million net
loss and $6.2 million of cash consumed by net changes in
operating accounts, which was partially offset by
$8.9 million of non-cash items included in our net loss.
The principal changes in non-cash items that favorably affected
operating cash flow included $6.7 million of depreciation
and amortization expense, $1.4 million of stock-based
compensation expense and $0.8 million of bad debt expense.
Changes in working capital that resulted in a source of cash
included the following:
|
|
|
|
|
a $3.6 million decrease in accounts receivable; and
|
|
|
|
a $2.5 million decrease in prepaid expenses and other
current assets.
|
Changes in working capital that resulted in a use of cash
included the following:
|
|
|
|
|
a $2.5 million increase in inventories and inventory
included in fixed assets;
|
|
|
|
a $2.8 million decrease in accounts payable;
|
|
|
|
a $3.2 million decrease in accrued liabilities; and
|
|
|
|
a $2.0 million decrease in deferred revenue.
|
Cash flow
from investing activities
Net cash used in investing activities in 2009 increased to
$5.2 million from $2.7 million in 2008. In 2009 this
consisted of $4.1 million related to acquisitions and
$1.2 million of net purchases of property and equipment and
additions to license and patent costs. See Notes 3, 5 and 6
to the Consolidated Financial Statements.
Net cash used in investing activities in 2008 increased to
$2.7 million from $2.2 million in 2007. In 2008 this
consisted of $6.1 million related to purchases of property
and equipment and additions to license and patent costs,
partially offset by $3.5 million of asset dispositions,
principally the sale of the Grand Junction facility. See
Notes 5 and 6 to the Consolidated Financial Statements.
Capital expenditures were $1.0 million in 2009,
$5.8 million in 2008 and $0.9 million in 2007. Capital
expenditures in 2009 primarily consisted of expenditures for
tooling and systems associated with our new product development
efforts and leasehold improvements and equipment to support our
3Dpropartstm
service.
Cash flow
from financing activities
Net cash provided by financing activities improved to
$0.3 million in 2009 from a net use of $1.4 million in
2008. Net cash provided by financing activities was
$14.7 million in 2007. This change in 2009 resulted
primarily from the release of restricted cash, partially offset
by debt repayments and lower stock option exercise activity.
The decrease in 2008 resulted primarily from the absence of any
significant financing activities and the $2.1 million
increase in restricted cash used to collateralize the redemption
of the remaining outstanding industrial development bonds
following the sale of the Grand Junction facility. Net proceeds
from stock option exercises and equity compensation awards
declined to $1.1 million in the 2008 period from
$2.9 million in 2007, primarily reflecting lower option
exercise activity.
39
Outstanding
debt and capitalized lease obligations
At December 31, 2009, total debt and capitalized lease
obligations decreased to $8.5 million from
$11.7 million at December 31, 2008 due to the
redemption of the outstanding industrial development bonds
discussed below and principal payments on capitalized lease
obligations. Our capitalized lease obligations were
$8.5 million at December 31, 2009 and
$8.7 million at December 31, 2008.
Our outstanding debt and capitalized lease obligations at
December 31, 2009 and December 31, 2008 were as
follows:
Table
13
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
Industrial development revenue bonds
|
|
$
|
|
|
|
$
|
3,085
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
3,085
|
|
|
|
|
|
|
|
|
|
|
Capitalized lease obligations:
|
|
|
|
|
|
|
|
|
Current portion of capitalized lease obligation
|
|
|
213
|
|
|
|
195
|
|
Capitalized lease obligation, less current portion
|
|
|
8,254
|
|
|
|
8,467
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8,467
|
|
|
|
8,662
|
|
Total current portion
|
|
|
213
|
|
|
|
3,280
|
|
|
|
|
|
|
|
|
|
|
Total long-term portion
|
|
|
8,254
|
|
|
|
8,467
|
|
|
|
|
|
|
|
|
|
|
Total debt and capitalized lease obligations
|
|
$
|
8,467
|
|
|
$
|
11,747
|
|
|
|
|
|
|
|
|
|
|
Industrial
development bonds
Our Grand Junction, Colorado facility was financed by industrial
development bonds in the original aggregate principal amount of
$4.9 million. At December 31, 2008 the outstanding
principal amount of these bonds was $3.1 million. Interest
on the bonds accrued at a variable rate of interest and was
payable monthly. The interest rate at December 31, 2008 was
1.28%.
Following the sale of our Grand Junction facility in December
2008, we fully collateralized the repayment of the industrial
development bonds, including interest and other amounts due
through the redemption date, with a portion of the cash proceeds
of the sale and $1.2 million of restricted cash previously
held by the trustee. In January 2009, the remaining outstanding
bonds of $3.1 million, plus accrued and unpaid interest,
were redeemed utilizing the restricted cash. Following the
redemption of the industrial development bonds, we have no debt
for borrowed money outstanding.
Capitalized
lease obligations
Our principal contractual commitments consist of capitalized
lease obligations of $8.5 million and $8.7 million at
December 31, 2009 and 2008, respectively.
Our 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
values of the headquarters facility lease and the furniture and
fixture lease at December 31, 2009 and 2008, respectively,
were $8.5 million and $8.7 million. See Note 12
to the Consolidated Financial Statements.
Stockholders
equity
Stockholders equity increased by $2.5 million to
$104.7 million at December 31, 2009 from
$102.2 million at December 31, 2008. This increase was
primarily attributable to the $1.1 million of net income in
2009,
40
partially offset by the $0.1 million of other comprehensive
income and a $1.5 million increase in additional
paid-in-capital
consisting of:
|
|
|
|
|
$0.3 million of net proceeds from stock option exercises
and other equity compensation awards during 2009; and
|
|
|
|
$1.2 million of stock compensation expense recorded in
stockholders equity during 2009. See Note 14 to the
Consolidated Financial Statements.
|
Commitments
On February 8, 2006, we entered into a lease agreement with
KDC-Carolina Investments 3, LP pursuant to which KDC constructed
and leased to us an approximately 80,000 square foot
building in Rock Hill, South Carolina. Under the terms of this
lease, KDC agreed to lease the building to us for an initial
15-year term
following completion. We took occupancy of the building in
November 2006.
After its initial term, the lease provides us with the option to
renew the lease for two additional five-year terms as well as
the right to cause KDC, subject to certain terms and conditions,
to expand the leased premises during the term of the lease, in
which case the term of the lease would be extended. The lease is
a triple net lease and provides for the payment of base rent of
approximately $0.7 million annually from 2010 through 2020,
including rent escalations in 2011 and 2016, and
$0.5 million in 2021. Under the terms of the lease, we are
obligated to pay all taxes, insurance, utilities and other
operating costs with respect to the leased premises.
The lease also grants us the right to purchase the leased
premises and undeveloped land surrounding the leased premises on
terms and conditions described more particularly in the lease.
In accordance with ASC 840, Leases, we are
considered an owner of the property. Therefore, as of
December 31, 2006, we recorded $8.5 million as
building in our consolidated balance sheet with a corresponding
capitalized lease obligation in the liabilities section of the
Consolidated Balance Sheet. See Note 12 to the Consolidated
Financial Statements.
We lease certain other facilities under non-cancelable operating
leases expiring through 2013. The leases are generally on a
net-rent basis, under which we pay taxes, maintenance and
insurance. We expect leases that expire to be renewed or
replaced by leases on other properties. Rental expense for the
years ended December 31, 2009, 2008 and 2007 was
$1.7 million, $1.8 million and $2.7 million,
respectively.
Future contractual payments at December 31, 2009 are set
forth in Table 14 below.
Table
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
|
|
2010
|
|
|
2011-2012
|
|
|
2013-2014
|
|
|
Later Years
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Capitalized lease obligations
|
|
$
|
795
|
|
|
$
|
1,487
|
|
|
$
|
1,402
|
|
|
$
|
13,000
|
|
|
$
|
16,684
|
|
Non-cancelable operating leases
|
|
|
1,257
|
|
|
|
1,121
|
|
|
|
188
|
|
|
|
|
|
|
|
2,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,052
|
|
|
$
|
2,608
|
|
|
$
|
1,590
|
|
|
$
|
13,000
|
|
|
$
|
19,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 ASC
815, Derivatives and Hedging, and we
41
recognize all gains and losses (realized or unrealized) in
interest and other expenses, net in our Consolidated Statements
of Operations.
The dollar equivalent of our foreign currency contracts and
their related fair values as of December 31, 2009 and
December 31, 2008 were as follows:
Table
15
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency
|
|
|
|
Purchase Contracts
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Notional amount
|
|
$
|
1,587
|
|
|
$
|
1,680
|
|
Fair value
|
|
|
1,563
|
|
|
|
1,699
|
|
|
|
|
|
|
|
|
|
|
Net unrealized (loss) gain
|
|
$
|
(24
|
)
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2009 and 2008, the notional amount of these
contracts at their respective settlement dates amounted to
$1.6 million and $1.7 million, respectively. These
contracts related to purchases of inventory from third parties.
The notional amount of the purchase contracts aggregated CHF
1.6 million and CHF 1.8 million, respectively
(equivalent to $1.6 million and $1.7 million,
respectively, at settlement date).
The net fair value of all foreign exchange contracts at
December 31, 2009 and 2008 reflected nominal unrealized
losses at December 31, 2009 and nominal unrealized gains at
December 31, 2008. The foreign currency contracts
outstanding at December 31, 2009 expired at various times
between January 6, 2010 and February 3, 2010.
Changes in the fair value of derivatives are recorded in
interest and other expenses, net in our 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
Consolidated Balance Sheets.
The total impact of foreign currency related items on our
Consolidated Statements of Operations was a $0.1 million
loss for 2009, a $0.4 million gain for 2008 and a nominal
gain for 2007.
Critical
Accounting Policies and Significant Estimates
The discussion and analysis of our results of operations and
financial condition set forth in this
Form 10-K
is based on our Consolidated Financial Statements, which have
been prepared in accordance with U.S. generally accepted
accounting principles. The preparation of these financial
statements requires us to make critical accounting estimates
that directly impact our Consolidated Financial Statements and
related disclosures.
Critical accounting estimates are estimates that meet two
criteria:
|
|
|
|
|
The estimates require that we make assumptions about matters
that are highly uncertain at the time the estimates are
made; and
|
|
|
|
There exist different estimates that could reasonably be used in
the current period, or changes in the estimates used are
reasonably likely to occur from period to period, both of which
would have a material impact on our results of operations or
financial condition.
|
On an ongoing basis, we evaluate our estimates, including those
related to stock-based compensation, revenue recognition, the
allowance for doubtful accounts, income taxes, inventories,
goodwill and other intangible and long-lived assets and
contingencies. We base our estimates and assumptions on
historical experience and on various other assumptions that we
believe are reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
42
The following paragraphs discuss the items that we believe are
the critical accounting policies most affected by significant
management estimates and judgments. Management has discussed and
periodically reviews these critical accounting policies, the
basis for their underlying assumptions and estimates and the
nature of our related disclosures herein with the Audit
Committee of the Board of Directors.
Revenue
recognition
Revenue from the sale of systems and related products and
materials is recognized upon shipment or when services are
performed, provided that persuasive evidence of a sales
arrangement exists, both title and risk of loss have passed to
the customer and collection is reasonably assured. Persuasive
evidence of a sales arrangement exists upon execution of a
written sales agreement or a signed purchase order that
constitutes a fixed and legally binding commitment between us
and the buyer. In instances where sales are made to an
authorized reseller, the same criterion cited above is applied
to determine the recognition of revenue. The resellers
creditworthiness is evaluated prior to such sale. The reseller
takes ownership of the related systems, products or materials
and payment is not dependent upon the resellers sale to an
end-user.
Sales of our systems generally include equipment, a software
license, a warranty on the equipment, training and installation.
For arrangements with multiple deliverables, revenues are
recognized based on an allocation of the total amount of the
arrangement to the separate units of accounting based on fair
value of vendor-specific objective evidence (VSOE),
as determined by the price charged for the undelivered items
when sold separately. We also evaluate the impact of undelivered
items on the functionality of delivered items for each sales
transaction and, where appropriate, defer revenue on delivered
items when that functionality has been affected. Functionality
is determined to be met if the delivered products or services
represent a separate earnings process.
Revenue from services is recognized at the time of performance.
Training revenue is recognized after training is complete, and
installation revenue is recognized after the installation is
accepted. We provide end-users with maintenance under a warranty
agreement for up to one year and defer a portion of the revenue
from the related systems sale at the time of sale based on the
relative fair value of those services as determined by VSOE, as
determined by the renewal rate of the maintenance contract.
After the initial warranty period, we offer these customers
optional maintenance contracts. Deferred maintenance revenue is
recognized ratably, on a straight-line basis, over the period of
the contract.
We sell equipment with embedded software to our customers. The
embedded software is not sold separately, it is not a
significant focus of the marketing effort and we do not provide
post-contract customer support specific to the software or incur
significant costs that are within the scope of ASC 985,
Software. Additionally, the functionality that the
software provides is marketed as part of the overall product.
The software embedded in the equipment is incidental to the
equipment as a whole such that ASC 985 is not applicable. Sales
of these products are recognized in accordance with ASC 605.25,
Multiple-Element Arrangements.
Shipping and handling costs billed to customers for equipment
sales are included in product revenue in the Consolidated
Statement of Operations. Costs we incur that are associated with
shipping and handling are included in product cost of sales in
the Consolidated Statement of Operations.
Credit is extended, and creditworthiness is determined, based on
an evaluation of each customers financial condition. New
customers are generally required to complete a credit
application and provide references and bank information to
facilitate an analysis of creditworthiness. Customers with a
favorable profile may receive credit terms based on that profile
that differ from our general credit terms. Creditworthiness is
considered, among other things, in evaluating our relationship
with customers with past due balances.
Our terms of sale generally require payment within 30 to
60 days after shipment of a product although we also
recognize that longer payment periods are customary in some
countries in which we transact business. To reduce credit risk
in connection with systems sales, we may, depending upon the
circumstances, require significant deposits prior to shipment
and may retain a security interest in a system sold until fully
paid. In some circumstances, we may require payment in full for
our products prior to shipment and may require international
43
customers to furnish letters of credit. For services, we either
bill customers on a
time-and-materials
basis or sell customers service agreements that are recorded as
deferred revenue and provide for payment in advance on either an
annual or other periodic basis.
Allowance
for doubtful accounts
Our estimate for the allowance for doubtful accounts related to
trade receivables is based on two methods. The amounts
calculated from each of these methods are combined to determine
the total amount reserved.
First, we evaluate specific accounts where we have information
that the customer may have an inability to meet our financial
obligations (for example, aging over 90 days past due or
bankruptcy). In these cases, we use our judgment, based on
available facts and circumstances, and record a specific reserve
for that customer against amounts due to reduce the receivable
to the amount that is expected to be collected. These specific
reserves are re-evaluated and adjusted as additional information
is received that impacts the amount reserved.
Second, a reserve is established for all customers based on a
range of percentages applied to aging categories. These
percentages are based on historical collection and write-off
experience. If circumstances change (for example, we experience
higher-than-expected
defaults or an unexpected material adverse change in a major
customers ability to meet its financial obligations to
us), the estimate of the recoverability of amounts due to us
could be reduced by a material amount. Similarly, if we
experience
lower-than-expected
defaults or improved customer financial condition, estimates of
recoverability of amounts due could increase.
We also provide an allowance account for returns and discounts.
This allowance is evaluated on a specific account basis. In
addition, we provide a general reserve for all customers that
have not been specifically identified based on historical
experience.
Our allowance for doubtful accounts declined to
$1.8 million at December 31, 2009 from
$2.0 million at December 31, 2008. This change
resulted primarily from the write down of uncollectible
receivables and a reduction in receivables over 90 days
past due. We believe that our allowance for doubtful accounts is
a critical accounting estimate because it is susceptible to
change and dependent upon events that may or may not occur and
because the impact of recognizing additional allowances for
doubtful accounts may be material to the assets reported on our
balance sheet and in our results of operations.
Income
taxes
We and our domestic subsidiaries file a consolidated
U.S. federal income tax return. Our
non-U.S. subsidiaries
file income tax returns in their respective local jurisdictions.
We provide for income taxes on those portions of our foreign
subsidiaries accumulated earnings that we believe are not
reinvested indefinitely in their businesses.
We account for income taxes under the asset and liability
method. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and tax benefit carry-forwards. Deferred income tax liabilities
and assets at the end of each period are determined using
enacted tax rates.
We record deferred income tax assets arising from temporary
differences between recorded net income and taxable net income
when and if we believe that future earnings will be sufficient
to realize the tax benefit. We provide a valuation allowance for
those jurisdictions where the expiration date of tax benefit
carry-forwards or the projected taxable earnings indicate that
realization is not likely.
Under the provisions of ASC 740, Income Taxes, a
valuation allowance is required to be established or maintained
when, based on currently available information and other
factors, it is more likely than not that all or a portion of a
deferred income tax asset will not be realized. ASC 740 provides
that an important factor in determining whether a deferred
income tax asset will be realized is whether there has been
sufficient income in recent years and whether sufficient income
is expected in future years in order to utilize the deferred
income tax asset. Based upon our accumulated losses, we
established and maintain a valuation allowance against our
deferred income tax assets.
44
We believe that our estimate of deferred income tax assets and
our maintenance of a valuation allowance against such assets are
critical accounting estimates because they are subject to, among
other things, an estimate of future taxable income in the
U.S. and in other
non-U.S. tax
jurisdictions, which are susceptible to change and dependent
upon events that may or may not occur, and because the impact of
our valuation allowance may be material to the assets reported
on our balance sheet and in our results of operations. We intend
to continue to assess our valuation allowance in accordance with
the requirements of ASC 740.
The determination of our income tax provision is complex because
we have operations in numerous tax jurisdictions outside the
U.S. that are subject to certain risks that ordinarily
would not be expected in the U.S. Tax regimes in certain
jurisdictions are subject to significant changes, which may be
applied on a retroactive basis. If this were to occur, our tax
expense could be materially different than the amounts reported.
We periodically estimate the probable tax obligations using
historical experience in tax jurisdictions and our informed
judgment. There are inherent uncertainties related to the
interpretation of tax regulations in the jurisdictions in which
we transact business. The judgments and estimates made at a
point in time may change based on the outcome of tax audits, as
well as changes to, or further interpretations of, regulations.
Income tax expense is adjusted in the period in which these
events occur, and these adjustments are included in our
consolidated statements of operations. If such changes take
place, there is a risk that our effective tax rate may increase
or decrease in any period.
Inventories
Inventories are stated at the lower of cost or net realizable
value, cost being determined predominantly on the
first-in,
first-out method. Reserves for inventories are provided based on
historical experience and current product demand. Our inventory
reserve was $2.7 million at December 31, 2009 compared
with $3.2 million at December 31, 2008. We evaluate
the adequacy of these reserves quarterly. Our determination of
the allowance for inventory reserves is subject to change
because it is based on managements current estimates of
required reserves and potential adjustments.
We believe that the allowance for inventory obsolescence is a
critical accounting estimate because it is susceptible to change
and dependent upon events that may or may not occur and because
the impact of recognizing additional obsolescence reserves may
be material to the assets reported on our balance sheet and in
our results of operations.
Goodwill
and other intangible and long-lived assets
We evaluate long-lived assets other than goodwill for impairment
whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable. If the
estimated future cash flows (undiscounted and without interest
charges) from the use of an asset are less than the carrying
value, a write-down would be recorded to reduce the related
asset to its estimated fair value.
The annual impairment testing required by ASC 350,
Intangibles Goodwill and Other, requires
us to use our judgment and could require us to write down the
carrying value of our goodwill and other intangible assets in
future periods. As required by ASC 350, we have allocated
goodwill to identifiable geographic reporting units, which are
tested for impairment using a two-step process detailed in that
statement. See Notes 6 and 7 to the Consolidated Financial
Statements. The first step requires comparing the fair value of
each reporting unit with our carrying amount, including
goodwill. If that fair value exceeds the carrying amount, the
second step of the process is not required to be performed, and
no impairment charge is required to be recorded. If that fair
value does not exceed that carrying amount, we must perform the
second step, which requires an allocation of the fair value of
the reporting unit to all assets and liabilities of that unit as
if the reporting unit had been acquired in a purchase business
combination and the fair value of the reporting unit was the
purchase price. The goodwill resulting from that purchase price
allocation is then compared to the carrying amount with any
excess recorded as an impairment charge.
45
Goodwill set forth on the Consolidated Balance Sheet as of
December 31, 2009 arose from acquisitions carried out in
2009 and in years prior to 2007. Goodwill arising from prior
years acquisitions was allocated to geographic reporting units
based on the percentage of
SLS®
systems then installed by geographic area. Goodwill arising from
other acquisitions was allocated to geographic reporting units
based on geographic dispersion of the acquired companies
sales at the time of their acquisition.
Pursuant to the requirements of ASC 350, we are required to
perform a valuation of each of our three geographic reporting
units annually, or upon significant changes in our business
environment. We conducted our annual impairment analysis in the
fourth quarter of 2009. To determine the fair value of each
reporting unit we utilized discounted cash flows, using five
years of projected unleveraged free cash flows and terminal
EBITDA earnings multiples. The discount rates used for the
analysis reflected a weighted average cost of capital based on
industry and capital structure adjusted for equity risk premiums
and size risk premiums based on market capitalization. The
discounted cash flow valuation uses projections of future cash
flows and includes assumptions concerning future operating
performance and economic conditions and may differ from actual
future cash flows. We also considered the current trading
multiples of comparable publicly-traded companies and the
historical pricing multiples for comparable merger and
acquisition transactions that have occurred in the industry.
Under each fair value measurement methodology considered, the
fair value of each reporting unit exceeded its carrying value;
accordingly, no goodwill impairment adjustments were recorded on
our Consolidated Balance Sheet.
The control premium that a third party would be willing to pay
to obtain a controlling interest in 3D Systems Corporation was
considered when determining fair value. In addition, factors
such as the performance of competitors were also considered.
Management concluded that there was a reasonable basis for the
excess of the estimated fair value of the geographic reporting
units over its market capitalization.
The estimated fair value of the three geographic reporting units
incorporated judgment and the use of estimates by management.
Potential factors requiring assessment include a further or
sustained decline in our stock price, variance in results of
operations from projections, and additional acquisition
transactions in the industry that reflect a lower control
premium. Any of these factors may cause us to re-evaluate
goodwill during any quarter throughout the year. If an
impairment charge were to be taken for goodwill it would be a
non-cash charge and would not impact our cash position or cash
flows, however such a charge could have a material impact to
equity and the statement of operations.
There was no goodwill impairment for the years ended
December 31, 2009, 2008 or 2007.
We performed an analysis of the fair value of long-lived assets
in accordance with ASC 360, Property, Plant and
Equipment. No impairment loss was recorded for the periods
presented.
Determining the fair value of a reporting unit, intangible asset
or a long-lived asset is judgmental and involves the use of
significant estimates and assumptions. Management bases its fair
value estimates on assumptions that it believes are reasonable
but are uncertain and subject to changes in market conditions.
Stock-based
compensation
ASC 718, Compensation Stock
Compensation, requires the recognition of the fair value
of stock-based compensation. Under the fair value recognition
provisions of ASC 718, stock-based compensation is estimated at
the grant date based on the fair value of the awards expected to
vest and recognized as expense ratably over the requisite
service period of the award. See Note 14 to the
Consolidated Financial Statements.
Contingencies
We account for contingencies in accordance with ASC 450,
Contingencies. ASC 450 requires that we record an
estimated loss from a loss contingency when information
available prior to issuance of our financial statements
indicates that it is probable that an asset has been impaired or
a liability has been incurred at the date of the financial
statements and the amount of the loss can be reasonably
estimated. Accounting for contingencies such as legal matters
requires us to use our judgment.
46
Recent
Accounting Pronouncements
See Note 2 to our Consolidated Financial Statements
included in this report for recently issued accounting
standards, including the expected dates of adoption and expected
impact to our Consolidated Financial Statements upon adoption.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures about Market Risk.
|
We are exposed to market risk from fluctuations in interest
rates, foreign currency exchange rates, and commodity prices,
which may adversely affect our results of operations and
financial condition. We seek to minimize these risks through
regular operating and financing activities and, when we consider
it to be appropriate, through the use of derivative financial
instruments. We do not purchase, hold or sell derivative
financial instruments for trading or speculative purposes.
Interest
rates
Our exposure to market risk for changes in interest rates
relates primarily to our cash and cash investments. We seek to
minimize the risk to our cash and cash investments by investing
cash in excess of our operating needs in short-term,
high-quality instruments issued by highly creditworthy financial
institutions, corporations or governments. With the amount of
cash and cash equivalents that we maintained at
December 31, 2009, a hypothetical 1% or 100 basis
point change in interest rates would have a $0.2 million
effect on our financial position and results of operations.
From time to time, we may use derivative financial instruments,
including interest rate swaps, collars or options, to manage our
exposure to fluctuations in interest rates. At December 31,
2009, we had no such financial instruments outstanding.
The fair value of fixed-rate financial instruments varies with
changes in interest rates. Generally, the fair value of these
fixed-rate instruments will increase as interest rates fall and
decrease as interest rates rise. The carrying amounts and
estimated fair values of our financial instruments at
December 31, 2009 were as follows:
Table
16
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
Carrying
|
|
Fair
|
|
|
Amount
|
|
Value
|
|
|
(Dollars in thousands)
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
Grand Junction note receivable
|
|
$
|
1,126
|
|
|
$
|
1,134
|
|
|
|
|
|
|
|
|
|
|
The fair value of the Grand Junction note receivable at
December 31, 2009 was determined by evaluating the nature
and terms of the instrument and considering prevailing economic
and market conditions. The interest rate used to discount the
contractual payments associated with the Grand Junction note
receivable was 15.67%. This rate was derived by taking the
risk-free interest rate for similar maturities and adding an
estimated risk premium intended to reflect the credit risk. See
Note 10 to the Consolidated Financial Statements. Such
estimates are subjective and involve uncertainties and matters
of significant judgment. Changes in assumptions could
significantly affect our estimates.
Foreign
exchange rates
We transact business globally and are subject to risks
associated with fluctuating foreign exchange rates. More than
50% of our consolidated revenue is derived from sales outside of
the U.S. See Business Global
Operations above. This revenue is generated primarily from
the operations of our foreign sales subsidiaries in their
respective countries and surrounding geographic areas and is
denominated in each subsidiarys local functional currency
although certain sales are denominated in other currencies,
including U.S. dollars or Euros, rather than the local
functional currency. These subsidiaries incur most of their
expenses (other than
47
intercompany expenses) in their local functional currency. These
currencies include the Euro, British Pound, Swiss Franc and
Japanese Yen.
The geographic areas outside the U.S. in which we operate
are generally not considered to be highly inflationary.
Nonetheless, these foreign operations are sensitive to
fluctuations in currency exchange rates arising from, among
other things, certain intercompany transactions that are
generally denominated in U.S. dollars rather than their
respective functional currencies. Our operating results as well
as our assets and liabilities are also subject to the effect of
foreign currency translation when the operating results, assets
and liabilities of our foreign subsidiaries are translated into
U.S. dollars in our Consolidated Financial Statements.
The total impact of foreign currency related items on our
consolidated statements of operations was a $0.1 million
loss for 2009, a $0.4 million gain for 2008 and a nominal
gain for 2007. The unrealized effect of foreign currency
translation was nominal in 2009, and in 2008 resulted in a
$1.0 million gain that was recorded in stockholders
equity as other comprehensive income, compared to a
$1.6 million gain in 2007. At December 31, 2009,
a hypothetical change of 10% in foreign currency exchange
rates would cause a $6.4 million change in revenue in our
Consolidated Statement of Operations assuming all other
variables were held constant.
We and our subsidiaries 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 and our subsidiaries 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 U.S. 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
apply ASC 815, Derivatives and Hedging, to report
all derivative instruments on the balance sheet at fair value.
We have not adopted hedge accounting, and all gains and losses
(realized or unrealized) are recognized in interest and other
expenses, net in the Consolidated Statements of Operations.
The dollar equivalent of our foreign currency contracts and
their related fair values as of December 31, 2009 and 2008
were as follows:
Table
17
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency
|
|
|
|
Purchase Contracts
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Notional amount
|
|
$
|
1,587
|
|
|
$
|
1,680
|
|
Fair value
|
|
|
1,563
|
|
|
|
1,699
|
|
|
|
|
|
|
|
|
|
|
Net unrealized (loss) gain
|
|
$
|
(24
|
)
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2009 and 2008, the notional amount of these
contracts at their respective settlement dates amounted to
$1.6 million and $1.7 million, respectively. These
contracts related to purchases of inventory from third parties.
The notional amount of the purchase contracts related to
purchases aggregated CHF 1.6 million and CHF
1.8 million, respectively (equivalent to $1.6 million
and $1.7 million, respectively, at settlement date.)
The net fair value of all foreign exchange contracts at
December 31, 2009 reflected nominal unrealized losses at
December 31, 2009 and nominal unrealized gains at
December 31, 2008. The foreign currency contracts
outstanding at December 31, 2009 expired at various times
between January 6, 2010 and February 3, 2010.
Changes in the fair value of derivatives are recorded in
interest and other expenses, net in our 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
Consolidated Balance Sheets.
48
We are exposed to credit risk if the counterparties to such
transactions are unable to perform their obligations. However,
we seek to minimize such risk by entering into transactions with
counterparties that are believed to be creditworthy financial
institutions.
As noted above, we may use derivative financial instruments,
including foreign exchange forward contracts and foreign
currency options, to fix or limit our exposure to currency
fluctuations. We do not enter into derivative financial
instruments for speculative or trading purposes. The terms of
such instruments are generally twelve months or less. We do not
hedge our foreign currency exposures in a manner that would
entirely eliminate the effects of changes in foreign exchange
rates on our consolidated net income or loss.
Commodity
prices
We use various commodity raw materials and energy products in
conjunction with our manufacturing processes. Generally, we
acquire such components at market prices and do not use
financial instruments to hedge commodity prices. As a result, we
are exposed to market risks related to changes in commodity
prices of these components. At December 31, 2009, a
hypothetical 10% change in commodity prices for raw materials
would cause approximately a $0.5 million change to cost of
sales in our Consolidated Statement of Operations.
|
|
Item 8.
|
Financial
Statements and Supplementary Data.
|
Our Consolidated Financial Statements set forth below on pages
F-1 through F-38 are incorporated herein by reference.
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure.
|
Not applicable.
|
|
Item 9A.
|
Controls
and Procedures.
|
Evaluation
of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Securities Exchange Act) are controls and other
procedures that are designed to provide reasonable assurance
that the information that we are required to disclose in the
reports that we file or submit under the Securities 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 our
management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
In connection with the preparation of this
10-K, our
management, with the participation of our Chief Executive
Officer and our Chief Financial Officer, carried out an
evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures as of December 31,
2009. Based on this evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls
and procedures were effective as of December 31, 2009 to
provide reasonable assurance that our Consolidated Financial
Statements included in this
10-K were
prepared in accordance with generally accepted accounting
principles (GAAP) and present fairly, in all
material respects, our financial position, results of operations
and cash flows for the periods presented in conformity with GAAP.
Managements
Report on 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 Securities 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.
49
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 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.
In connection with the preparation of this
10-K, with
the participation of our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting
as of December 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 of our
internal control over financial reporting. Based on this
evaluation, our management has concluded that our internal
control over financial reporting was effective as of
December 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 the policies or procedures may deteriorate.
BDO Seidman, LLP, the independent registered public accounting
firm who audited our Consolidated Financial Statements included
in this
Form 10-K,
has issued a report on our internal control over financial
reporting, which is included in Item 8 of this
Form 10-K.
Changes
in Internal Controls over Financial Reporting.
There were no changes in our internal control over financial
reporting (as defined in
Rules 13a-15(f)
and
15d-15(f)
under the Securities Exchange Act) during the quarter ended
December 31, 2009 that materially affected, or are
reasonably likely to materially affect, our internal control
over financial reporting.
|
|
Item 9A(T).
|
Controls
and Procedures.
|
Not applicable.
|
|
Item 9B.
|
Other
Information.
|
None.
50
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance.
|
The balance of the information required in response to this Item
will be set forth in our Proxy Statement for our 2010 Annual
Meeting of Stockholders under the captions Election of
Directors, Corporate Governance Matters,
Section 16(a) Beneficial Ownership Reporting
Compliance, Corporate Governance Matters
Code of Conduct and Code of Ethics, Corporate
Governance Matters Corporate Governance and
Nominating Committee, and Corporate Governance
Matters Audit Committee. Such information is
incorporated herein by reference.
|
|
Item 11.
|
Executive
Compensation.
|
The information in response to this Item will be set forth in
our Proxy Statement for our 2010 Annual Meeting of Stockholders
under the captions Director Compensation,
Executive Compensation, Corporate Governance
Matters Compensation Committee, and
Executive Compensation Compensation Committee
Report. Such information is incorporated herein by
reference.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
|
Except as set forth below, the information required in response
to this Item will be set forth in our Proxy Statement for our
2010 Annual Meeting of Stockholders under the caption
Security Ownership of Certain Beneficial Owners and
Management. Such information is incorporated herein by
reference.
Equity
Compensation Plans
The following table summarizes information about the equity
securities authorized for issuance under our compensation plans
as of December 31, 2009. For a description of these plans,
please see Note 14 to the Consolidated Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
Number of Securities
|
|
|
Weighted Average
|
|
|
Remaining
|
|
|
|
to be Issued Upon
|
|
|
Exercise Price of
|
|
|
Available for
|
|
|
|
Exercise of
|
|
|
Outstanding
|
|
|
Future Issuance
|
|
|
|
Outstanding Options,
|
|
|
Options,
|
|
|
Under Equity
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Compensation Plans
|
|
|
|
(Number of securities in thousands)
|
|
|
Equity compensation plans approved by stockholders
|
|
|
520
|
|
|
$
|
10.52
|
|
|
|
1,454
|
|
Equity compensation plans not approved by stockholders
|
|
|
344
|
|
|
|
7.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
864
|
|
|
$
|
9.20
|
|
|
|
1,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 13.
|
Certain
Relationships and Related Transactions and Director
Independence.
|
The information required in response to this Item will be set
forth in our Proxy Statement for our 2010 Annual Meeting of
Stockholders under the caption Corporate Governance
Matters Director Independence and
Corporate Governance Matters Related Party
Transaction Policies and Procedures. Such information is
incorporated herein by reference.
|
|
Item 14.
|
Principal
Accounting Fees and Services.
|
The information in response to this Item will be set forth in
our Proxy Statement for our 2010 Annual Meeting of Stockholders
under the caption Fees of Independent Registered Public
Accounting Firm. Such information is incorporated herein
by reference.
51
PART IV
|
|
Item 15.
|
Exhibits,
Financial Statement Schedules.
|
|
|
|
|
|
(a)(3)
|
|
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 by 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 by 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
|
.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 the Registrants Current Report on Form 8-K,
filed on December 1, 2006.)
|
|
4
|
.1*
|
|
3D Systems Corporation 1996 Stock Incentive Plan. (Incorporated
by reference to Appendix A to Registrants Definitive Proxy
Statement filed on March 30, 2001.)
|
|
4
|
.2*
|
|
Form of Incentive Stock Option Contract for Executives pursuant
to the 1996 Stock Incentive Plan. (Incorporated by reference to
Exhibit 4.6 of Registrants Annual Report on Form 10-K for
the year ended December 31, 2000, filed on March 16, 2001.)
|
|
4
|
.3*
|
|
Form of Non-Statutory Stock Option Contract for Executives
pursuant to the 1996 Stock Incentive Plan. (Incorporated by
reference to Exhibit 4.7 of Registrants Annual Report on
Form 10-K for the year ended December 31, 2000, filed on March
16, 2001.)
|
|
4
|
.4*
|
|
Form of Employee Incentive Stock Option Contract pursuant to the
1996 Stock Incentive Plan. (Incorporated by reference to Exhibit
4.8 of Registrants Annual Report on Form 10-K for the year
ended December 31, 1999, filed on March 30, 2000.)
|
|
4
|
.5*
|
|
Form of Employee Non-Statutory Stock Option Contract pursuant to
the 1996 Stock Incentive Plan. (Incorporated by reference to
Exhibit 4.9 of Registrants Annual Report on Form 10-K for
the year ended December 31, 1999, filed on March 30, 2000.)
|
|
4
|
.6*
|
|
3D Systems Corporation 1996 Non-Employee Directors Stock
Option Plan. (Incorporated by reference to Appendix B to
Registrants Definitive Proxy Statement filed on March 30,
2001.)
|
|
4
|
.7*
|
|
Form of Director Option Contract pursuant to the 1996
Non-Employee Director Stock Option Plan. (Incorporated by
reference to Exhibit 4.5 of Registrants Annual Report on
Form 10-K for the year ended December 31, 1999, filed on March
30, 2000.)
|
|
4
|
.8*
|
|
3D Systems Corporation 2001 Stock Option Plan. (Incorporated by
reference to Exhibit 10.1 to Registrants Registration
Statement on Form S-8 filed on June 11, 2001.)
|
52
|
|
|
|
|
(a)(3)
|
|
Exhibits
|
|
|
4
|
.9*
|
|
Amended and Restated 2004 Incentive Stock Plan of 3D Systems
Corporation (Incorporated by reference to Exhibit 4.1 to the
Registrants Amendment No. 1 to Registration Statement
on Form S-8, filed May 20, 2009.)
|
|
4
|
.10*
|
|
Form of Restricted Stock Purchase Agreement for Employees.
(Incorporated by reference to Exhibit 4.2 to the
Registrants Registration Statement on Form S-8, filed on
May 19, 2004.)
|
|
4
|
.11*
|
|
Form of Restricted Stock Purchase Agreement for Officers.
(Incorporated by reference to Exhibit 4.3 to the
Registrants Registration Statement on Form S-8, filed on
May 19, 2004.)
|
|
4
|
.12*
|
|
Restricted Stock Plan for Non-Employee Directors of 3D Systems
Corporation. (Incorporated by reference to Exhibit 4.4 to the
Registrants Registration Statement on Form S-8, filed on
May 19, 2004.)
|
|
4
|
.13*
|
|
Amendment No. 1 to Restricted Stock Plan for Non-Employee
Directors. (Incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005, filed on August 1, 2005.)
|
|
4
|
.14*
|
|
Form of Restricted Stock Purchase Agreement for Non-Employee
Directors. (Incorporated by reference to Exhibit 4.5 to the
Registrants Registration Statement on Form S-8, filed on
May 19, 2004.)
|
|
4
|
.15
|
|
Rights Agreement dated as of December 9, 2008 between the
Registrant and Computershare Trust Company, N.A., as Rights
Agent. (Incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on Form 8-K, filed on December
9, 2008.)
|
|
10
|
.1*
|
|
Form of Indemnification Agreement between Registrant and certain
of its executive officers and directors. (Incorporated by
reference to Exhibit 10.18 to Form 8-B filed on August 16, 1993,
and the amendment thereto, filed on Form 8-B/A on February 4,
1994.)
|
|
10
|
.2
|
|
Patent License Agreement dated December 16, 1998 by and between
3D Systems, Inc., NTT Data CMET, Inc. and NTT Data Corporation.
(Incorporated by reference to Exhibit 10.56 to Registrants
Annual Report on Form 10-K for the year ended December 31, 1998,
filed on March 31, 1999.)
|
|
10
|
.3
|
|
Lease Agreement dated February 8, 2006 between the Registrant
and KDC-Carolina Investments 3, LP. (Incorporated by reference
to Exhibit 99.1 to Registrants Current Report on Form 8-K,
filed on February 10, 2006.)
|
|
10
|
.4
|
|
First Amendment to Lease Agreement dated August 7, 2006 between
the Registrant and KDC-Carolina Investments 3, LP. (Incorporated
by reference to Exhibit 10.1 of Registrants Current Report
on Form 8-K, filed on August 14, 2006.)
|
|
10
|
.5
|
|
Second Amendment to Lease Agreement effective as of October 6,
2006 to Lease Agreement dated February 8, 2006 between 3D
Systems Corporation and KDC-Carolina Investments 3, LP.
(Incorporated by reference to Exhibit 10.1 of Registrants
Current Report on Form 8-K, filed on October 10, 2006.)
|
|
10
|
.6
|
|
Third Amendment to Lease Agreement effective as of December 18,
2006 to Lease Agreement dated February 8, 2006 between 3D
Systems Corporation and KDC-Carolina Investments 3, LP.
(Incorporated by reference to Exhibit 10.1 of Registrants
Current Report on Form 8-K, filed on December 20, 2006.)
|
|
10
|
.7
|
|
Fourth Amendment to Lease Agreement effective as of February 26,
2007 to Lease Agreement dated February 8, 2006 between 3D
Systems Corporation and KDC-Carolina Investments 3, LP.
(Incorporated by reference to Exhibit 10.1 of Registrants
Current Report on Form 8-K, filed on March 1, 2007.)
|
|
10
|
.8*
|
|
Employment Letter Agreement, effective September 19, 2003, by
and between Registrant and Abraham N. Reichental. (Incorporated
by reference to Exhibit 10.1 to Registrants Current Report
on Form 8-K, filed on September 22, 2003.)
|
|
10
|
.9*
|
|
Agreement, dated December 17, 2003, by and between Registrant
and Abraham N. Reichental. (Incorporated by reference to Exhibit
10.43 to Registrants Amendment No. 1 to Registration
Statement on Form S-1, filed on January 21, 2004.)
|
|
10
|
.10*
|
|
First Amendment to Employment Agreement, dated July 24, 2007, by
and between Registrant and Abraham N. Reichental. (Incorporated
by reference to Exhibit 10.1 to Registrants Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
2007, filed on August 6, 2007.)
|
53
|
|
|
|
|
(a)(3)
|
|
Exhibits
|
|
|
14
|
.1
|
|
Code of Conduct, as amended effective as of November 30, 2006
(Incorporated by reference to Exhibit 99.1 of the
Registrants Current Report on Form 8-K, filed on December
1, 2006.)
|
|
14
|
.2
|
|
3D Systems Corporation Code of Ethics for Senior Financial
Executives and Directors. (Incorporated by reference to Exhibit
14.2 of the Registrants Annual Report on Form 10-K for the
year ended December 31, 2003, filed on March 15, 2004.)
|
|
21
|
.1
|
|
Subsidiaries of Registrant.
|
|
23
|
.1
|
|
Consent of Independent Registered Public Accounting Firm dated
February 24, 2010.
|
|
31
|
.1
|
|
Certification of Principal Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, dated February 24, 2010.
|
|
31
|
.2
|
|
Certification of Principal Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, dated February 24, 2010.
|
|
32
|
.1
|
|
Certification of Principal Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, dated February 24, 2010.
|
|
32
|
.2
|
|
Certification of Principal Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, dated February 24, 2010.
|
|
|
|
* |
|
Management contract or compensatory plan or arrangement. |
54
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on our behalf by the undersigned,
thereunto duly authorized.
3D Systems Corporation
|
|
|
|
By:
|
/s/ Abraham
N. Reichental
|
Abraham N. Reichental
President and Chief Executive Officer
Date: February 24, 2010
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of registrant and in the capacities and on the dates
indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Abraham
N. Reichental
Abraham
N. Reichental
|
|
Chief Executive Officer, President and Director (Principal
Executive Officer)
|
|
February 24, 2010
|
|
|
|
|
|
/s/ Damon
J. Gregoire
Damon
J. Gregoire
|
|
Vice President and Chief Financial Officer (Principal Financial
and Accounting Officer)
|
|
February 24, 2010
|
|
|
|
|
|
/s/ Charles
W. Hull
Charles
W. Hull
|
|
Executive Vice President, Chief Technology Officer and Director
|
|
February 24, 2010
|
|
|
|
|
|
/s/ G.
Walter Loewenbaum, II
G.
Walter Loewenbaum, II
|
|
Chairman of the Board of Directors
|
|
February 24, 2010
|
|
|
|
|
|
/s/ Miriam
V. Gold
Miriam
V. Gold
|
|
Director
|
|
February 24, 2010
|
|
|
|
|
|
/s/ Jim
D. Kever
Jim
D. Kever
|
|
Director
|
|
February 24, 2010
|
|
|
|
|
|
/s/ Kevin
S. Moore
Kevin
S. Moore
|
|
Director
|
|
February 24, 2010
|
|
|
|
|
|
/s/ Daniel
S. Van Riper
Daniel
S. Van Riper
|
|
Director
|
|
February 24, 2010
|
|
|
|
|
|
/s/ William
E. Curran
William
E. Curran
|
|
Director
|
|
February 24, 2010
|
|
|
|
|
|
/s/ Karen
E. Welke
Karen
E. Welke
|
|
Director
|
|
February 24, 2010
|
55
3D
Systems Corporation
Index to
Consolidated Financial Statements
and
Consolidated Financial Statement Schedule
|
|
|
|
|
Consolidated Financial Statements
|
|
|
|
|
|
|
|
F-2
|
|
|
|
|
F-3
|
|
|
|
|
F-4
|
|
|
|
|
F-5
|
|
|
|
|
F-6
|
|
|
|
|
F-7
|
|
|
|
|
F-8
|
|
|
|
|
F-9
|
|
Consolidated Financial Statement Schedule
|
|
|
|
|
|
|
|
F-39
|
|
|
|
|
F-40
|
|
F-1
Report of
Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
3D Systems Corporation
Rock Hill, South Carolina
We have audited 3D Systems Corporation and its
subsidiaries (the Company) internal control
over financial reporting as of December 31, 2009, based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). 3D
Systems Corporations management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying
Item 9A, Managements Report on Internal Control
over Financial Reporting. Our responsibility is to express
an opinion on the Companys internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our
opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, 3D Systems Corporation did maintain, in all
material respects, effective internal control over financial
reporting as of December 31, 2009, based on the COSO
criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of 3D Systems Corporation and its
subsidiaries as of December 31, 2009 and 2008, and the
related consolidated statements of operations,
stockholders equity, comprehensive income (loss) and cash
flows for each of the three years in the period ended
December 31, 2009 and our report dated February 24,
2010 expressed an unqualified opinion thereon.
BDO Seidman, LLP
Charlotte, North Carolina
February 24, 2010
F-2
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
3D Systems Corporation
Rock Hill, South Carolina
We have audited the accompanying consolidated balance sheets of
3D Systems Corporation and its subsidiaries (the
Company) as of December 31, 2009 and 2008 and
the related consolidated statements of operations,
stockholders equity, comprehensive income (loss) and cash
flows for each of the three years in the period ended
December 31, 2009. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of 3D Systems Corporation and its subsidiaries as of
December 31, 2009 and 2008 and the results of its
operations and its cash flows for each of the three years in the
period ended December 31, 2009 in conformity with
accounting principles generally accepted in the United States of
America.
As discussed in Note 21 to the consolidated financial
statements, effective January 1, 2007 the Company adopted
FASB Interpretation No. 48, Accounting for Uncertainty
in Income Taxes an Interpretation of FASB
No. 109, which is now incorporated into the Accounting
Standards Codification in Section 740.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Companys internal control over
financial reporting as of December 31, 2009, based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO Criteria) and
our report dated February 24, 2010 expressed an unqualified
opinion thereon.
BDO Seidman, LLP
Charlotte, North Carolina
February 24, 2010
F-3
3D
Systems Corporation
As of
December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands,
|
|
|
|
except par value)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
24,913
|
|
|
$
|
22,164
|
|
Accounts receivable, net of allowance for doubtful accounts of
$1,790 (2009) and $2,015 (2008)
|
|
|
23,759
|
|
|
|
25,276
|
|
Inventories, net of reserves of $2,693 (2009) and $3,156
(2008)
|
|
|
18,378
|
|
|
|
21,018
|
|
Prepaid expenses and other current assets
|
|
|
2,415
|
|
|
|
1,601
|
|
Deferred income tax assets
|
|
|
634
|
|
|
|
935
|
|
Restricted cash
|
|
|
54
|
|
|
|
3,309
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
70,153
|
|
|
|
74,303
|
|
Property and equipment, net
|
|
|
24,789
|
|
|
|
24,072
|
|
Intangible assets, net
|
|
|
3,634
|
|
|
|
3,663
|
|
Goodwill
|
|
|
48,730
|
|
|
|
48,010
|
|
Other assets, net
|
|
|
3,097
|
|
|
|
2,954
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
150,403
|
|
|
$
|
153,002
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Industrial development bonds
|
|
$
|
|
|
|
$
|
3,085
|
|
Current portion of capitalized lease obligation
|
|
|
213
|
|
|
|
195
|
|
Accounts payable
|
|
|
12,994
|
|
|
|
17,133
|
|
Accrued liabilities
|
|
|
11,114
|
|
|
|
8,057
|
|
Customer deposits
|
|
|
627
|
|
|
|
1,136
|
|
Deferred revenue
|
|
|
8,487
|
|
|
|
9,418
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
33,435
|
|
|
|
39,024
|
|
Long-term portion of capitalized lease obligation
|
|
|
8,254
|
|
|
|
8,467
|
|
Other liabilities
|
|
|
3,944
|
|
|
|
3,277
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
45,633
|
|
|
|
50,768
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
3D Systems stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred Stock, authorized 5,000 shares, none issued
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, authorized
60,000 shares; 22,774 (2009) and 22,424
(2008) issued
|
|
|
23
|
|
|
|
22
|
|
Additional paid-in capital
|
|
|
177,682
|
|
|
|
176,180
|
|
Treasury stock, at cost: 74 shares (2009) and
59 shares (2008)
|
|
|
(134
|
)
|
|
|
(120
|
)
|
Accumulated deficit in earnings
|
|
|
(77,491
|
)
|
|
|
(78,557
|
)
|
Accumulated other comprehensive income
|
|
|
4,617
|
|
|
|
4,709
|
|
|
|
|
|
|
|
|
|
|
Total 3D Systems stockholders equity
|
|
|
104,697
|
|
|
|
102,234
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
104,770
|
|
|
|
102,234
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
150,403
|
|
|
$
|
153,002
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
80,798
|
|
|
$
|
103,613
|
|
|
$
|
120,147
|
|
Services
|
|
|
32,037
|
|
|
|
35,327
|
|
|
|
36,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
112,835
|
|
|
|
138,940
|
|
|
|
156,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
|
43,301
|
|
|
|
56,375
|
|
|
|
65,681
|
|
Services
|
|
|
19,804
|
|
|
|
26,997
|
|
|
|
27,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales
|
|
|
63,105
|
|
|
|
83,372
|
|
|
|
93,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
49,730
|
|
|
|
55,568
|
|
|
|
63,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
35,528
|
|
|
|
45,859
|
|
|
|
54,159
|
|
Research and development
|
|
|
11,129
|
|
|
|
15,199
|
|
|
|
14,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
46,657
|
|
|
|
61,058
|
|
|
|
68,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
3,073
|
|
|
|
(5,490
|
)
|
|
|
(5,177
|
)
|
Interest and other expenses, net
|
|
|
1,160
|
|
|
|
370
|
|
|
|
1,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
1,913
|
|
|
|
(5,860
|
)
|
|
|
(6,249
|
)
|
Provision for income taxes
|
|
|
774
|
|
|
|
294
|
|
|
|
491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
1,139
|
|
|
|
(6,154
|
)
|
|
|
(6,740
|
)
|
Less: net income attributable to noncontrolling interest
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to 3D Systems common stockholders
|
|
$
|
1,066
|
|
|
$
|
(6,154
|
)
|
|
$
|
(6,740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to 3D Systems common stockholders
per share basic and diluted
|
|
$
|
0.05
|
|
|
$
|
(0.28
|
)
|
|
$
|
(0.33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Attributable to 3D Systems Stockholders
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Total
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Par
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
3D Systems
|
|
|
Attributable to
|
|
|
|
|
|
|
|
|
|
Value
|
|
|
Paid-in
|
|
|
Treasury Stock
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
Noncontrolling
|
|
|
Total
|
|
|
|
Shares
|
|
|
$0.001
|
|
|
Capital
|
|
|
Shares
|
|
|
Amount
|
|
|
Deficit
|
|
|
Income
|
|
|
Equity
|
|
|
Interest
|
|
|
Equity
|
|
|
|
(In thousands, except par value)
|
|
|
Balance at December 31, 2006
|
|
|
19,113
|
|
|
$
|
19
|
|
|
$
|
132,566
|
|
|
|
28
|
|
|
$
|
(89
|
)
|
|
$
|
(64,455
|
)
|
|
$
|
1,628
|
|
|
$
|
69,669
|
|
|
$
|
|
|
|
$
|
69,669
|
|
Exercise of stock options
|
|
|
269
|
|
|
|
1
|
|
|
|
2,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,844
|
|
|
|
|
|
|
|
2,844
|
|
Conversion of subordinated debentures
|
|
|
1,508
|
|
|
|
1
|
|
|
|
15,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,132
|
|
|
|
|
|
|
|
15,132
|
|
Issuance (repurchase) of restricted stock, net
|
|
|
84
|
|
|
|
|
(a)
|
|
|
70
|
|
|
|
22
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
48
|
|
|
|
|
|
|
|
48
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
(a)
|
|
|
2,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,668
|
|
|
|
|
|
|
|
2,668
|
|
Private placement
|
|
|
1,250
|
|
|
|
1
|
|
|
|
20,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,368
|
|
|
|
|
|
|
|
20,368
|
|
Cumulative effect of adoption of accounting for uncertainty of
income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,208
|
)
|
|
|
|
|
|
|
(1,208
|
)
|
|
|
|
|
|
|
(1,208
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,740
|
)
|
|
|
|
|
|
|
(6,740
|
)
|
|
|
|
|
|
|
(6,740
|
)
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,606
|
|
|
|
1,606
|
|
|
|
|
|
|
|
1,606
|
|
Gain on pension plan unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
382
|
|
|
|
382
|
|
|
|
|
|
|
|
382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
22,224
|
|
|
|
22
|
|
|
|
173,645
|
|
|
|
50
|
|
|
|
(111
|
)
|
|
|
(72,403
|
)
|
|
|
3,616
|
|
|
|
104,769
|
|
|
|
|
|
|
|
104,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
161
|
|
|
|
|
(a)
|
|
|
1,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,083
|
|
|
|
|
|
|
|
1,083
|
|
Issuance (repurchase) of restricted stock, net
|
|
|
39
|
|
|
|
|
(a)
|
|
|
15
|
|
|
|
9
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
6
|
|
Stock compensation expense
|
|
|
|
|
|
|
|
(a)
|
|
|
1,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,437
|
|
|
|
|
|
|
|
1,437
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,154
|
)
|
|
|
|
|
|
|
(6,154
|
)
|
|
|
|
|
|
|
(6,154
|
)
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,013
|
|
|
|
1,013
|
|
|
|
|
|
|
|
1,013
|
|
Gain on pension plan unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
|
|
|
|
80
|
|
|
|
|
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
22,424
|
|
|
|
22
|
|
|
|
176,180
|
|
|
|
59
|
|
|
|
(120
|
)
|
|
|
(78,557
|
)
|
|
|
4,709
|
|
|
|
102,234
|
|
|
|
|
|
|
|
102,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
15
|
|
|
|
|
(a)
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
|
|
|
|
|
|
|
|
84
|
|
Issuance (repurchase) of restricted stock, net
|
|
|
335
|
|
|
|
1
|
|
|
|
228
|
|
|
|
15
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
215
|
|
|
|
|
|
|
|
215
|
|
Stock compensation expense
|
|
|
|
|
|
|
|
(a)
|
|
|
1,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,190
|
|
|
|
|
|
|
|
1,190
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,066
|
|
|
|
|
|
|
|
1,066
|
|
|
|
73
|
|
|
|
1,139
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35
|
)
|
|
|
(35
|
)
|
|
|
|
|
|
|
(35
|
)
|
Gain/(loss) on pension plan unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57
|
)
|
|
|
(57
|
)
|
|
|
|
|
|
|
(57
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
22,774
|
|
|
$
|
23
|
|
|
$
|
177,682
|
|
|
|
74
|
|
|
$
|
(134
|
)
|
|
$
|
(77,491
|
)
|
|
$
|
4,617
|
|
|
$
|
104,697
|
|
|
$
|
73
|
|
|
$
|
104,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Amounts not shown due to rounding. |
Accumulated other comprehensive income of $4,617 consists of a
cumulative unrealized gain on pension plan of $138 and foreign
currency translation of $4,479.
See accompanying notes to consolidated financial statements.
F-6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Net income (loss) attributable to 3D Systems
|
|
$
|
1,066
|
|
|
$
|
(6,154
|
)
|
|
$
|
(6,740
|
)
|
Net income attributable to noncontrolling interest
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
1,139
|
|
|
|
(6,154
|
)
|
|
|
(6,740
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on pension obligation
|
|
|
(57
|
)
|
|
|
80
|
|
|
|
382
|
|
Foreign currency translation adjustments
|
|
|
(35
|
)
|
|
|
1,013
|
|
|
|
1,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss), net
|
|
$
|
1,047
|
|
|
$
|
(5,061
|
)
|
|
$
|
(4,752
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,139
|
|
|
$
|
(6,154
|
)
|
|
$
|
(6,740
|
)
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (benefit of) deferred income taxes
|
|
|
309
|
|
|
|
(243
|
)
|
|
|
(268
|
)
|
Depreciation and amortization
|
|
|
5,886
|
|
|
|
6,676
|
|
|
|
6,970
|
|
Provisions for bad debts
|
|
|
909
|
|
|
|
849
|
|
|
|
109
|
|
Stock-based compensation
|
|
|
1,190
|
|
|
|
1,437
|
|
|
|
2,668
|
|
Loss on disposition of property and equipment
|
|
|
194
|
|
|
|
167
|
|
|
|
6
|
|
Changes in operating accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
1,430
|
|
|
|
3,592
|
|
|
|
5,067
|
|
Inventories
|
|
|
2,436
|
|
|
|
(2,461
|
)
|
|
|
6,055
|
|
Prepaid expenses and other current assets
|
|
|
(371
|
)
|
|
|
2,484
|
|
|
|
1,921
|
|
Accounts payable
|
|
|
(4,395
|
)
|
|
|
(2,802
|
)
|
|
|
(7,141
|
)
|
Accrued liabilities
|
|
|
617
|
|
|
|
(3,228
|
)
|
|
|
(683
|
)
|
Customer deposits
|
|
|
(529
|
)
|
|
|
(383
|
)
|
|
|
(4,977
|
)
|
Deferred revenue
|
|
|
(1,106
|
)
|
|
|
(2,023
|
)
|
|
|
(160
|
)
|
Other operating assets and liabilities
|
|
|
25
|
|
|
|
(1,390
|
)
|
|
|
(202
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
7,734
|
|
|
|
(3,479
|
)
|
|
|
2,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(974
|
)
|
|
|
(5,811
|
)
|
|
|
(946
|
)
|
Proceeds from disposition of property and equipment and other
assets
|
|
|
52
|
|
|
|
3,454
|
|
|
|
21
|
|
Acquisition of businesses
|
|
|
(4,098
|
)
|
|
|
|
|
|
|
|
|
Additions to license and patent costs
|
|
|
(223
|
)
|
|
|
(297
|
)
|
|
|
(683
|
)
|
Software development costs
|
|
|
|
|
|
|
|
|
|
|
(597
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(5,243
|
)
|
|
|
(2,654
|
)
|
|
|
(2,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank borrowings
|
|
|
|
|
|
|
|
|
|
|
(8,200
|
)
|
Proceeds from issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
20,367
|
|
Proceeds from exercise of stock options and restricted stock
|
|
|
298
|
|
|
|
1,098
|
|
|
|
2,890
|
|
Repayment of long-term debt
|
|
|
(195
|
)
|
|
|
(423
|
)
|
|
|
(388
|
)
|
Repayment of short-term borrowings
|
|
|
(3,085
|
)
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
3,255
|
|
|
|
(2,109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
273
|
|
|
|
(1,434
|
)
|
|
|
14,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
(15
|
)
|
|
|
42
|
|
|
|
269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
2,749
|
|
|
|
(7,525
|
)
|
|
|
15,358
|
|
Cash and cash equivalents at the beginning of the period
|
|
|
22,164
|
|
|
|
29,689
|
|
|
|
14,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period
|
|
$
|
24,913
|
|
|
$
|
22,164
|
|
|
$
|
29,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-8
3D
Systems Corporation
|
|
Note 1
|
Basis of
Presentation
|
The consolidated financial statements include the accounts of 3D
Systems Corporation and all majority owned subsidiaries (the
Company). All significant intercompany accounts and
transactions have been eliminated in consolidation. The
Companys annual reporting period is the calendar year.
The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States. Certain prior period amounts have been
reclassified to conform to the current year presentation. These
reclassifications include $401 and $48 of foreign exchange gain
for the years ended December 31, 2008 and 2007,
respectively, that had previously been included in product cost
of sales, to interest and other expense, net in the
Companys consolidated statements of operations. This had
the effect of decreasing the Companys previously reported
gross profit and interest and other expense, net for 2008 and
2007 by $401 and $48, respectively, and of increasing operating
loss for those periods by the same amounts. It did not affect
any of the other line items on the Companys consolidated
statements of operations for 2008 or 2007.
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 these estimates and assumptions.
All amounts presented in the accompanying footnotes are
presented in thousands, except for per share information.
The Company has evaluated subsequent events from the date of the
condensed consolidated balance sheet through February 24,
2010, the date of the filing of this
Form 10-K.
During this period, no material recognizable subsequent events
were identified. See Note 25 for a description of
subsequent events that are not significant to the Companys
financial statements.
|
|
Note 2
|
Significant
Accounting Policies
|
Use of
Estimates
The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements
requires the Company to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenue and
expenses and related disclosure of contingent assets and
liabilities. On an ongoing basis, the Company evaluates its
estimates, including, among others, those related to the
allowance for doubtful accounts, income taxes, inventories,
goodwill, other intangible assets, contingencies and revenue
recognition. The Company bases its estimates on historical
experience and on various other assumptions that are believed to
be reasonable, the results of which form the basis for making
judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results
may differ from these estimates.
Revenue
Recognition
Revenue from the sale of systems and related products and
materials is recognized upon shipment or when services are
performed, provided that persuasive evidence of a sales
arrangement exists, both title and risk of loss have passed to
the customer and collection is reasonably assured. Persuasive
evidence of a sales arrangement exists upon execution of a
written sales agreement or signed purchase order that
constitutes a fixed and legally binding commitment between the
Company and the buyer. In instances where sales are made to an
authorized reseller, the same criterion cited above is applied
to determine the recognition of revenue. The resellers
creditworthiness is evaluated prior to such sale. The reseller
takes ownership of the related systems, products or materials
and payment is not dependent upon the resellers sale to an
end user.
F-9
3D
Systems Corporation
Notes to Consolidated Financial
Statements (Continued)
Sales of systems generally include equipment, a software
license, a warranty on the equipment, training and installation.
For arrangements with multiple deliverables, revenues are
recognized based on an allocation of the total amount of the
arrangement to the separate units of accounting based on fair
value of vendor-specific objective evidence (VSOE),
as determined by the price charged for the undelivered items
when sold separately. The Company also evaluates the impact of
undelivered items on the functionality of delivered items for
each sales transaction and, where appropriate, defers revenue on
delivered items when that functionality has been affected.
Functionality is determined to be met if the delivered products
or services represent a separate earnings process.
Revenue from services is recognized at the time of performance.
Training revenue is recognized after training is complete, and
installation revenue is recognized after the installation is
accepted. The Company provides end-users with maintenance under
a warranty agreement for up to one year and defers a portion of
the revenue from the related systems sale at the time of sale
based on the relative fair value of those services as determined
by VSOE, as determined by the renewal rate of the maintenance
contract. After the initial warranty period, the Company offers
these customers optional maintenance contracts. Deferred
maintenance revenue is recognized ratably, on a straight-line
basis, over the period of the contract.
The Company sells equipment with embedded software to its
customers. The embedded software is not sold separately, it is
not a significant focus of the marketing effort and the Company
does not provide post-contract customer support specific to the
software or incur significant costs that are within the scope of
the FASB Accounting Standards Codification ASC 985,
Software. Additionally, the functionality that the
software provides is marketed as part of the overall product.
The software embedded in the equipment is incidental to the
equipment as a whole such that ASC 985 is not applicable. Sales
of these products are recognized in accordance with ASC 605.25,
Multiple-Element Arrangements.
Shipping and handling costs billed to customers for equipment
sales and sales of materials are included in product revenue in
the consolidated statements of operations. Costs incurred by the
Company associated with shipping and handling are included in
product cost of sales in the consolidated statements of
operations.
Credit is extended, and creditworthiness is determined, based on
an evaluation of each customers financial condition. New
customers are generally required to complete a credit
application and provide references and bank information to
facilitate an analysis of creditworthiness. Customers with a
favorable profile may receive credit terms that differ from the
Companys general credit terms. Creditworthiness is
considered, among other things, in evaluating the Companys
relationship with customers with past due balances.
The Companys terms of sale generally require payment
within 30 to 60 days after shipment of a product, although
the Company also recognizes that longer payment periods are
customary in some countries where it transacts business. To
reduce credit risk in connection with systems sales, the Company
may, depending upon the circumstances, require significant
deposits prior to shipment and may retain a security interest in
a system sold until fully paid. In some circumstances, the
Company may require payment in full for its products prior to
shipment and may require international customers to furnish
letters of credit. For services, the Company either bills
customers on a
time-and-materials
basis or sells customers service agreements that are recorded as
deferred revenue and provide for payment in advance on either an
annual or other periodic basis.
Cash
and Cash Equivalents
Investments with original maturities of three months or less at
the date of purchase are considered to be cash equivalents. The
Companys policy is to invest cash in excess of short-term
operating and debt-service requirements in such cash
equivalents. These instruments are stated at cost, which
approximates market value because of the short maturity of the
instruments. The Company places its cash with high quality
financial
F-10
3D
Systems Corporation
Notes to Consolidated Financial
Statements (Continued)
institutions and believes its risk of loss is limited; however,
at times, account balances may exceed international and
U.S. federally insured limits.
In connection with the sale of the Grand Junction facility in
December 2008, the repayment of the industrial development bonds
was fully collateralized by increasing the cash collateral from
$1,200 to $3,161 using a portion of the sale proceeds. Such
restricted cash is reported separately on the consolidated
balance sheets at December 31, 2008 as a current asset, and
it was not available for the Companys operations. On
January 28, 2009 the Company redeemed the remaining $3,085
of outstanding bonds, plus accrued interest, in accordance with
their terms using the restricted cash. The remaining restricted
cash was released to the Company on January 28, 2009. See
Note 11 to the consolidated financial statements.
Allowance
for Doubtful Accounts
The Companys estimate of the allowance for doubtful
accounts related to trade receivables is based on two methods.
The amounts calculated from each of these methods are combined
to determine the total amount reserved.
First, the Company evaluates specific accounts for which it has
information that the customer may be unable to meet its
financial obligations (for example, bankruptcy). In these cases,
the Company uses its judgment, based on the available facts and
circumstances, and records a specific reserve for that customer
against amounts due to reduce the outstanding receivable balance
to the amount that is expected to be collected. These specific
reserves are re-evaluated and adjusted as additional information
is received that impacts the amount reserved.
Second, a reserve is established for all customers based on
percentages applied to aging categories. These percentages are
based on historical collection and write-off experience. If
circumstances change (for example, the Company experiences
higher-than-expected
defaults or an unexpected adverse change in a customers
financial condition), estimates of the recoverability of amounts
due to the Company could be reduced. Similarly, if the Company
experiences
lower-than-expected
defaults or improved customer financial condition, estimates of
the recoverability of amounts due the Company could be increased.
The Company also provides an allowance account for returns and
discounts. This allowance is evaluated on a specific account
basis. In addition, the Company provides a general reserve for
returns from customers that have not been specifically
identified based on historical experience.
Inventories
Inventories are stated at the lower of cost or net realizable
market value, cost being determined using the
first-in,
first-out method. Reserves for slow-moving and obsolete
inventories are provided based on historical experience and
current product demand. The Company evaluates the adequacy of
these reserves quarterly.
Property
and Equipment
Property and equipment are carried at cost and depreciated on a
straight-line basis over the estimated useful lives of the
related assets, generally three to thirty years. Leasehold
improvements are amortized on a straight-line basis over the
shorter of (i) their estimated useful lives and
(ii) the estimated or contractual lives of the leases.
Realized gains and losses are recognized upon disposal or
retirement of the related assets and are reflected in results of
operations. Charges for repairs and maintenance are expensed as
incurred.
Goodwill
and Intangible Assets
The annual impairment testing required by ASC Section 350,
Intangibles Goodwill and Other requires
the Company to use judgment and could require the Company to
write down the carrying value of its
F-11
3D
Systems Corporation
Notes to Consolidated Financial
Statements (Continued)
goodwill and other intangible assets in future periods. The
Company allocated goodwill to identifiable geographic reporting
units, which are tested for impairment using a two-step process
detailed in that statement. See Note 7 to the consolidated
financial statements. The first step requires comparing the fair
value of each reporting unit with the carrying amount, including
goodwill. If that fair value exceeds the carrying amount, the
second step of the process is not required to be performed, and
no impairment charge is required to be recorded. If that fair
value does not exceed that carrying amount, the Company must
perform the second step, which requires an allocation of the
fair value of the reporting unit to all assets and liabilities
of that unit as if the reporting unit had been acquired in a
purchase business combination and the fair value of the
reporting unit was the purchase price. The goodwill resulting
from that purchase price allocation is then compared to the
carrying amount with any excess recorded as an impairment charge.
Goodwill set forth on the Consolidated Balance Sheet as of
December 31, 2009 arose from acquisitions carried out in
2009 and in years prior to December 31, 2007. Goodwill
arising from prior year acquisitions was allocated to geographic
reporting units based on the percentage of
SLS®
systems then installed by geographic area. Goodwill arising from
other acquisitions was allocated to geographic reporting units
based on geographic dispersion of the acquired companies
sales at the time of their acquisition.
The Company is required to perform a valuation of each of its
three geographic reporting units annually, or upon significant
changes in the Companys business environment. The Company
conducted its annual impairment analysis in the fourth quarter
of 2009. To determine the fair value of each reporting unit the
Company utilized discounted cash flows, using five years of
projected unleveraged free cash flows and terminal EBITDA
earnings multiples. The discount rates used for the analysis
reflected a weighted average cost of capital based on industry
and capital structure adjusted for equity risk premiums and size
risk premiums based on market capitalization. The discounted
cash flow valuation uses projections of future cash flows and
includes assumptions concerning future operating performance and
economic conditions and may differ from actual future cash
flows. The Company also considered the current trading multiples
of comparable publicly-traded companies and the historical
pricing multiples for comparable merger and acquisition
transactions that have occurred in the industry. The control
premium that a third party would be willing to pay to obtain a
controlling interest in the Company was considered when
determining fair value. Under each fair value measurement
methodology considered, the fair value of each reporting unit
exceeded its carrying value; accordingly, no goodwill impairment
adjustments were recorded. In addition, factors such as the
performance of competitors were also considered. The Company
concluded that there was a reasonable basis for the excess of
the estimated fair value of the geographic reporting units over
its market capitalization.
The estimated fair value of the three geographic reporting units
incorporated judgment and the use of estimates by management.
Potential factors requiring assessment include a further or
sustained decline in our stock price, variance in results of
operations from projections, and additional acquisition
transactions in the industry that reflect a lower control
premium. Any of these factors may cause management to
re-evaluate goodwill during any quarter throughout the year. If
an impairment charge were to be taken for goodwill it would be a
non-cash charge and would not impact the Companys cash
position or cash flows; however, such a charge could have a
material impact to equity and the statement of operations.
There was no goodwill impairment for the years ended
December 31, 2009, 2008 or 2007.
Determining the fair value of a reporting unit, intangible asset
or a long-lived asset is judgmental and involves the use of
significant estimates and assumptions. The Company bases its
fair value estimates on assumptions that it believes are
reasonable but are uncertain and subject to changes in market
conditions.
Licenses,
Patent Costs and Other Long-Lived Assets
Licenses, patent costs and other long-lived assets include costs
incurred to perfect license or patent rights under applicable
domestic and foreign laws and the amount incurred to acquire
existing licenses and patents.
F-12
3D
Systems Corporation
Notes to Consolidated Financial
Statements (Continued)
Licenses and patent costs are amortized on a straight-line basis
over their estimated useful lives, which are approximately seven
to twenty years. Amortization expense is included in cost of
sales, research and development expenses and selling, general
and administrative expenses, depending upon the nature and use
of the technology.
The Company evaluates long-lived assets other than goodwill for
impairment whenever events or changes in circumstances indicate
that the carrying value of an asset may not be recoverable. If
the estimated future cash flows (undiscounted and without
interest charges) from the use of the asset are less than its
carrying value, a write-down would be recorded to reduce the
related asset to its estimated fair value.
The Company performed an analysis of the fair value of
long-lived assets in accordance with ASC Section 360. No
impairment loss was recorded for the periods presented.
Capitalized
Software Costs
Certain software development and production costs were
capitalized when the related product reached technological
feasibility. No costs were capitalized in 2009 or 2008. Costs
capitalized in 2007 were $599. Amortization of software
development costs begins when the related products are available
for use in related systems. Amortization expense, included in
cost of sales, amounted to $141, $1,017 and $199 for 2009, 2008
and 2007, respectively, based on the straight-line method using
an estimated useful life of one year. Net capitalized software
costs aggregated $0, $141 and $1,158 at December 31, 2009,
2008 and 2007, respectively, and are included in intangible
assets in the accompanying consolidated balance sheets.
Contingencies
The Company follows the provisions of ASC Section 450,
Contingencies, which requires that an estimated loss
from a loss contingency be accrued by a charge to income if it
is both probable that an asset has been impaired or that a
liability has been incurred and that the amount of the loss can
be reasonably estimated.
Foreign
Currency Translation
The Company transacts business globally and is subject to risks
associated with fluctuating foreign exchange rates. More than
50% of the Companys consolidated revenue is derived from
sales outside the U.S. This revenue is generated primarily
from the operations of a research and production subsidiary in
Switzerland and from
non-U.S. sales
subsidiaries in their respective countries and surrounding
geographic areas. This revenue is primarily denominated in each
subsidiarys local functional currency although certain
sales are denominated in other currencies, including
U.S. dollars or the Euro. These subsidiaries incur most of
their expenses (other than intercompany expenses) in their local
functional currency. These currencies include Euros, British
Pounds, Swiss Francs and Japanese Yen.
The geographic areas outside the U.S. in which the Company
operates are generally not considered to be highly inflationary.
Nonetheless, these foreign operations are sensitive to
fluctuations in currency exchange rates arising from, among
other things, certain intercompany transactions that are
generally denominated in U.S. dollars rather than their
respective functional currencies. The Companys operating
results, assets and liabilities are subject to the effect of
foreign currency translation when the revenue, expenses and the
assets and liabilities of the Companys foreign
subsidiaries are translated into U.S. dollars in the
Companys consolidated financial statements. The assets and
liabilities of the Companys foreign subsidiaries are
translated from their respective functional currencies into
U.S. dollars based on the translation rate in effect at the
end of the related reporting period. The revenue and expenses of
the Companys foreign subsidiaries are translated to
U.S. dollars based on the average conversion rate for the
related period. Gains and losses
F-13
3D
Systems Corporation
Notes to Consolidated Financial
Statements (Continued)
resulting from these conversions are recorded in other
comprehensive income (loss) in the consolidated balance sheets.
Gains and losses resulting from foreign currency transactions
(transactions denominated in a currency other than the
functional currency of the Company or a subsidiary) are included
in the consolidated statements of operations, except for
inter-company receivables and payables for which settlement is
not planned or anticipated in the foreseeable future, which are
included as a component of accumulated other comprehensive
income (loss) in the consolidated balance sheets.
Derivative
Financial Instruments
The Company is exposed to market risk from changes in interest
rates and foreign currency exchange rates and commodity prices,
which may adversely affect its results of operations and
financial condition. The Company seeks to minimize these risks
through regular operating and financing activities and, when the
Company considers it to be appropriate, through the use of
derivative financial instruments. The Company does not purchase,
hold or sell derivative financial instruments for trading or
speculative purposes.
The Company applies ASC Section 815, Derivatives and
Hedging, to report all derivative instruments on the
balance sheet at fair value. The Company has not qualified for
hedge accounting; therefore, all gains and losses (realized or
unrealized) related to foreign currency derivative instruments
and all gains and losses (realized or unrealized) related to
interest rate derivative instruments are recognized in interest
and other expense, net in the consolidated statements of
operations.
The Company and its subsidiaries conduct business in various
countries using both their functional currencies and other
currencies to effect cross border transactions. As a result,
they 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, the
Company endeavors to match assets and liabilities in the same
currency on its U.S. balance sheet and those of its
subsidiaries in order to reduce these risks. The Company, when
it considers it to be appropriate, enters into foreign currency
contracts to hedge the exposures arising from those
transactions. At December 31, 2009 and 2008, these
contracts included contracts for the purchase of currencies
other than the U.S. dollar. The purchase contracts related
primarily to the procurement of inventory from a third party
denominated in Swiss francs.
The dollar equivalent of the foreign currency contracts and
their related fair values as of December 31, 2009 and 2008
were as follows:
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency
|
|
|
|
Purchase Contracts
|
|
|
|
2009
|
|
|
2008
|
|
|
Notional amount
|
|
$
|
1,587
|
|
|
$
|
1,680
|
|
Fair value
|
|
|
1,563
|
|
|
|
1,699
|
|
|
|
|
|
|
|
|
|
|
Net unrealized (loss) gain
|
|
$
|
(24
|
)
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
The net fair value of all foreign exchange contracts at
December 31, 2009 and 2008 reflected a net unrealized
(loss) gain of $(24) and $19, respectively. These foreign
currency contracts outstanding at December 31, 2009 expired
at various times between January 6, 2010 and
February 3, 2010. See Note 20 to the consolidated
financial statements.
The total impact of foreign currency related items on the
consolidated statements of operations was a net loss of $104 for
2009 and net gains of $401 and $48 for 2008 and 2007,
respectively.
F-14
3D
Systems Corporation
Notes to Consolidated Financial
Statements (Continued)
The Company is exposed to credit risk if the counterparties to
such transactions are unable to perform their obligations.
However, the Company seeks to minimize such risk by entering
into transactions with counterparties that are believed to be
creditworthy financial institutions.
Research
and Development Costs
Research and development costs are expensed as incurred.
Earnings
per Share
Basic net income (loss) per share is computed by dividing net
income (loss) available to common stockholders by the weighted
average number of shares of common stock outstanding during the
period. Diluted net income (loss) per share is computed by
dividing net income (loss), as adjusted for the assumed issuance
of all dilutive shares, by the weighted average number of shares
of common stock outstanding plus the number of additional common
shares that would have been outstanding if all dilutive common
shares issuable upon exercise of outstanding stock options or
conversion of convertible securities had been issued. Common
shares related to stock options are excluded from the
computation when their effect is anti-dilutive, that is, when
their inclusion would increase the Companys net income per
share or reduce its net loss per share.
Advertising
Costs
Advertising costs are expensed as incurred. Advertising expenses
were $523, $1,250 and $1,450 for the years ended
December 31, 2009, 2008 and 2007, respectively.
Pension
costs
The Company sponsors a retirement benefit for one of its
non-U.S. subsidiaries
in the form of a defined benefit pension plan. Accounting
standards require the cost of providing this pension benefit be
measured on an actuarial basis. Actuarial gains and losses
resulting from both normal
year-to-year
changes in valuation assumptions and differences from actual
experience are deferred and amortized. The application of these
accounting standards requires management to make assumptions and
judgments that can significantly affect these measurements.
Critical assumptions made by management in performing these
actuarial valuations include the selection of the discount rate
to determine the present value of the pension obligations that
affects the amount of pension expense recorded in any given
period. Changes in the discount rate could have a material
effect on the Companys reported pension obligations and
related pension expense. See Note 16 to the consolidated
financial statements.
Equity
Compensation Plans
The Company maintains stock-based compensation plans that are
described more fully in Note 14. Under the fair value
recognition provisions of ASC Section 718,
Compensation Stock Compensation,
stock-based compensation is estimated at the grant date based on
the fair value of the awards expected to vest and recognized as
expense ratably over the requisite service period of the award.
Income
Taxes
The Company and its domestic subsidiaries file a consolidated
U.S. federal income tax return. The Companys
non-U.S. subsidiaries
file income tax returns in their respective jurisdictions. The
Company provides for income taxes on those portions of its
foreign subsidiaries accumulated earnings that the Company
believes are not reinvested permanently in their business.
F-15
3D
Systems Corporation
Notes to Consolidated Financial
Statements (Continued)
Income taxes are accounted for under the asset and liability
method. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and tax benefit carry-forwards. Deferred income tax liabilities
and assets at the end of each period are determined using
enacted tax rates.
The Company provides a valuation allowance for those
jurisdictions in which the expiration date of tax benefit
carry-forwards or projected taxable earnings leads the Company
to conclude that it is not likely that it will be able to
realize the tax benefit of those carry-forwards.
The Company applies ASC 740 (formerly FIN 48) to
determine the impact of an uncertain tax position on the income
tax returns. In accordance with ASC 740, this impact must be
recognized at the largest amount that is more likely than not to
be required to be recognized upon audit by the relevant taxing
authority. See Note 21 to the consolidated financial
statements.
The Company includes interest and penalties accrued in the
consolidated financial statements as a component of income tax
expense.
Recent
Accounting Pronouncements
In June 2009, the FASB issued SFAS No. 168, The
FASB Accounting Standard
Codificationtm
(Codification or ASC) and the Hierarchy
of Generally Accepted Accounting Principles, effective for
interim and annual reporting periods ending after
September 15, 2009. This statement replaces
SFAS No. 162, The Hierarchy of Generally
Accepted Accounting Principles and establishes the
Codification (ASC) as the source of authoritative
U.S. accounting principles used in the preparation of
financial statements in conformity with GAAP. All guidance
contained in the Codification carries an equal level of
authority. The Codification does not replace or affect guidance
issued by the SEC or its staff. The FASB will not issue new
standards in the form of Statements, FASB Staff Positions or
Emerging Issues Task Force Abstracts. Instead, it will issue
Accounting Standards Updates (ASUs). The FASB will
not consider ASUs as authoritative in their own right; rather,
ASUs will serve only to update the Codification, provide
background information about the guidance and provide the bases
for conclusions on the change(s) in the Codification. This
statement became effective in the third quarter of 2009, and
references made to FASB guidance throughout this document have
been updated for the Codification.
The Company has adopted ASC 820 as it relates to financial
assets and liabilities as of January 1, 2008 and as it
relates to nonfinancial assets and liabilities as of
January 1, 2009, and the impact of the adoption was not
significant. See Notes 10 and 20 to the condensed
consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations, which is now
incorporated into ASC 805, Business Combinations.
ASC 805 provides revised guidance on how acquirers recognize and
measure the consideration transferred, identifiable assets
acquired, liabilities assumed, non-controlling interests, and
goodwill acquired in a business combination. It also expands
required disclosures surrounding the nature and financial
effects of business combinations and is effective, on a
prospective basis, for fiscal years beginning after
December 15, 2008. The Company adopted the standard as of
January 1, 2009 and the impact of adoption was not
significant. See Note 3 to the consolidated financial
statements.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements an Amendment of ARB No. 51.
This guidance is now incorporated into ASC 810,
Consolidation. It establishes accounting and
reporting standards for ownership interests in subsidiaries held
by parties other than the parent, the amount of consolidated net
income attributable to the parent and the noncontrolling
interest, changes in a parents ownership interest and the
valuation of retained noncontrolling equity investments when a
subsidiary is deconsolidated. ASC 810 also establishes
disclosure requirements that clearly
F-16
3D
Systems Corporation
Notes to Consolidated Financial
Statements (Continued)
identify and distinguish between the interests of the parent and
the interests of the noncontrolling owners. The Company adopted
the standard as of January 1, 2009 and the impact of
adoption was not significant.
In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging
Activities, an amendment of FASB Statement No. 133,
which is now incorporated into ASC 815, Derivatives and
Hedging. ASC 815 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.
In April 2009, the FASB issued FSP
FAS 107-1
and APB
28-1,
Interim Disclosures about Fair Value of Financial
Instruments. This guidance is now incorporated into ASC
825, Financial Instruments. This guidance requires
disclosures about fair values of financial instruments for
interim reporting periods of publicly traded companies as well
as in annual financial statements. It also requires those
disclosures in summarized financial information at interim
reporting periods. The guidance became effective for interim and
annual reporting periods ending after June 15, 2009. The
Company adopted ASC 825 for the period ended June 30, 2009,
and the impact of the adoption was not significant; see
Notes 10 and 20 to the consolidated financial statements.
In May 2009, the FASB issued SFAS No. 165,
Subsequent Events, which is now incorporated into
ASC 855, Subsequent Events. ASC 855 establishes
general standards of accounting for and disclosure of events
that occur after the balance sheet date but before the financial
statements are issued or are available to be issued. It requires
the disclosure of the date through which an entity has evaluated
subsequent events and the basis for that date. The guidance sets
forth the period after the balance sheet date during which
management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or
disclosure in the financial statements, the circumstances under
which an entity should recognize events or transactions
occurring after the balance sheet date in its financial
statements and the disclosures that an entity should make about
events or transactions that occurred after the balance sheet
date. ASC 855 became effective for the Company for the period
ended June 30, 2009 and is to be applied prospectively. The
impact of adoption was not significant. See Note 25 to the
consolidated financial statements.
In October 2009, the FASB issued ASU
2009-13,
Multiple-Deliverable Revenue Arrangements a
consensus of the FASB Emerging Issues Task Force, to
provide amendments to the criteria in Subtopic
609-24 of
the Codification for separating consideration into
multiple-deliverable revenue arrangements. ASU
2009-13
establishes a selling price hierarchy for determining the
selling price of each specific deliverable, which includes
vendor-specific objective evidence (VSOE) if
available, third party evidence if VSOE is not available or
estimated selling price if neither VSOE nor third party evidence
is available. ASU
2009-13 also
eliminates the residual method for allocating revenue between
the elements of an arrangement and requires that arrangement
consideration be allocated at the inception of the arrangement
to all deliverables using the relative selling price method,
which allocates any discount in the arrangement proportionally
to each deliverable on the basis of each deliverables
selling price. This update expands the disclosure requirements
regarding a vendors multiple-deliverable revenue
arrangements. ASU
2009-13 is
effective prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after
June 15, 2010, with early adoption permitted. The Company
is currently evaluating the impact of ASU
2009-13 on
its consolidated financial statements.
In October 2009, the FASB issued ASU
2009-14,
Certain Revenue Arrangements That Include Software
Elements a consensus of the FASB Emerging Issues
Task Force. This Update removes tangible products
containing software components and nonsoftware components that
function together to deliver the tangible products
essential functionality from the scope of the software revenue
guidance in Subtopic
985-605 of
the Codification. Additionally, ASU
2009-14
provides guidance on how a vendor should allocate arrangement
F-17
3D
Systems Corporation
Notes to Consolidated Financial
Statements (Continued)
consideration to deliverables in an arrangement that includes
both tangible products and software that is not essential to the
products functionality. ASU
2009-14
requires the same expanded disclosures that are included within
ASU 2009-13.
ASU 2009-14
is effective prospectively for revenue arrangements entered into
or materially modified in fiscal years beginning on or after
June 15, 2010, with early adoption permitted. A company is
required to adopt the amendments in both ASU
2009-13 and
ASU 2009-14
in the same period using the same transition method. The Company
is currently evaluating the impact of ASU
2009-14 on
its consolidated financial statements.
On October 1, 2009, the Company acquired the assets of
Acu-Cast Technologies in Lawrenceburg, Tennessee, a service
bureau that provides various prototypes and end-use parts built
using the Companys
SLA®
systems. Acu-Cast Technologies also operates a plaster casting
foundry and offers a broad variety of finishing options on the
parts it produces. The Company acquired Acu-Cast Technologies
for its breadth of product and finishing offerings. Acu-Cast
Technologies has been integrated into the Companys
3Dpropartstm
service.
On November 24, 2009, the Company acquired the assets of
AdvaTech Manufacturing in Goodland, Indiana, a provider of rapid
prototyping and manufacturing services to the aerospace and
defense industries. It creates prototypes and end-use parts
built using the Companys
SLS®
systems. The Company acquired AdvaTech Manufacturing for its
expertise providing parts to the aerospace industry. AdvaTech
Manufacturing has been integrated into the Companys
3Dpropartstm
service.
The fair value of the consideration paid for these two
acquisitions totaled $4,098 and was allocated to the assets
purchased and liabilities assumed based on their estimated fair
values as of the acquisition dates, with the excess recorded as
goodwill, as shown in the table below. These amounts are
included in the Companys consolidated balance sheets at
December 31, 2009.
|
|
|
|
|
|
|
2009
|
|
|
Fixed assets
|
|
$
|
4,324
|
|
Intangible assets
|
|
|
760
|
|
Goodwill
|
|
|
408
|
|
Net liabilities assumed
|
|
|
(1,394
|
)
|
|
|
|
|
|
Net assets acquired
|
|
$
|
4,098
|
|
|
|
|
|
|
On February 16, 2010, the Company acquired the assets of
Moeller Design in Seattle, Washington, a leader in premium
precision investment casting services and prototyping for
aerospace and medical device applications. Its parts and
prototypes are built using the Companys
SLA®
systems. The Company acquired Moeller Design for its expertise
in producing premium parts and to expand the geographic
footprint of its
3Dpropartstm
service to the west coast. The Company is in the process of
integrating Moeller Design into its
3Dpropartstm
service. Due to the timing of this acquisition, at the time of
this filing the Company is in the process of allocating the fair
value of assets purchased and other intangibles identified as of
the acquisition date, with any excess to be recorded as goodwill.
F-18
3D
Systems Corporation
Notes to Consolidated Financial
Statements (Continued)
Components of inventories, net at December 31, 2009 and
2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Raw materials
|
|
$
|
2,294
|
|
|
$
|
1,635
|
|
Inventory held by assemblers
|
|
|
|
|
|
|
34
|
|
Work in process
|
|
|
253
|
|
|
|
146
|
|
Finished goods and parts
|
|
|
18,524
|
|
|
|
22,359
|
|
|
|
|
|
|
|
|
|
|
Total cost
|
|
|
21,071
|
|
|
|
24,174
|
|
Less: reserves
|
|
|
(2,693
|
)
|
|
|
(3,156
|
)
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
$
|
18,378
|
|
|
$
|
21,018
|
|
|
|
|
|
|
|
|
|
|
The balances of parts in inventory at December 31, 2009 and
2008 were $10,890 and $11,473, respectively.
|
|
Note 5
|
Property
and Equipment
|
Property and equipment at December 31, 2009 and 2008 are
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Useful Life
|
|
|
|
|
|
|
|
|
|
(In years)
|
|
|
Land
|
|
$
|
152
|
|
|
$
|
|
|
|
|
N/A
|
|
Building
|
|
|
9,454
|
|
|
|
8,566
|
|
|
|
25
|
|
Machinery and equipment
|
|
|
23,418
|
|
|
|
27,492
|
|
|
|
3-7
|
|
Capitalized software ERP
|
|
|
3,096
|
|
|
|
3,096
|
|
|
|
5
|
|
Office furniture and equipment
|
|
|
3,358
|
|
|
|
3,404
|
|
|
|
5
|
|
Leasehold improvements
|
|
|
4,941
|
|
|
|
7,567
|
|
|
|
Life of Lease
|
|
Rental equipment
|
|
|
1,079
|
|
|
|
1,116
|
|
|
|
5
|
|
Construction in progress
|
|
|
1,243
|
|
|
|
298
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
46,741
|
|
|
|
51,539
|
|
|
|
|
|
Less: Accumulated depreciation and amortization
|
|
|
(21,952
|
)
|
|
|
(27,467
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment, net of accumulated depreciation
and amortization
|
|
$
|
24,789
|
|
|
$
|
24,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense for 2009, 2008 and 2007
was $4,882, $4,872, and $4,296, respectively. Leasehold
improvements are amortized on a straight-line basis over the
shorter of (i) their estimated useful lives and
(ii) the estimated or contractual life of the related lease.
Capitalized leases related to buildings had a cost of $8,496 at
December 31, 2009 and 2008. Capitalized leases related to
office furniture and equipment had a cost of $542 at
December 31, 2009 and 2008.
For each of the years ended December 31, 2009 and 2008, the
Company recognized software amortization expense of $537 for
enterprise resource planning (ERP) system
capitalization costs.
In December 2008, the Company sold of its Grand Junction,
Colorado facility for $5,500, consisting of $3,500 of cash
proceeds (before deducting closing costs) and a $2,000 zero
interest, five-year promissory note from the buyer. Following
the closing of the Grand Junction facility in 2006,
approximately $3,454 of assets, net of accumulated depreciation,
were reclassified on the Companys consolidated balance
sheet from long-term assets to current assets, where they had
been recorded as assets held for sale.
F-19
3D
Systems Corporation
Notes to Consolidated Financial
Statements (Continued)
The Company discounted the note receivable by $1,017, reducing
the net gain to $636. In accordance with ASC
Section 360.20, Real Estate Sales, the Company
has not recognized this gain on the sale of its Grand Junction
facility as of December 31, 2009. The carrying value of the
long-term receivable, net of the discount and deferred gain is
recorded in Other assets, net. Only a small portion
of the gain will be recognized until the earlier of (i) the
sale of the property securing the note by the buyer, or
(ii) repayment of the promissory note by the buyer.
(a) Licenses and patent costs at December 31, 2009 and
2008 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
2009
|
|
|
2008
|
|
|
Useful Life
|
|
|
|
|
|
|
|
|
|
(In years)
|
|
|
Licenses, at cost
|
|
$
|
5,875
|
|
|
$
|
5,875
|
|
|
|
0.8
|
|
Patent costs
|
|
|
16,069
|
|
|
|
16,078
|
|
|
|
7.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,944
|
|
|
|
21,953
|
|
|
|
|
|
Less: Accumulated amortization
|
|
|
(19,036
|
)
|
|
|
(18,431
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net licenses and patent costs
|
|
$
|
2,908
|
|
|
$
|
3,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2009, 2008 and 2007, the Company capitalized $223, $297
and $683, respectively, for costs incurred to acquire, develop
and extend patents in the United States and various other
countries. Amortization of such previously capitalized patent
costs was $829 in 2009, $787 in 2008, and $1,467 in 2007. The
Company expects amortization expense with respect to previously
capitalized patent costs to be $408 in 2010, $387 in 2011, $216
in 2012, $248 in 2013 and $274 in 2014.
(b) Acquired Technology
Acquired technology, which was purchased in 2001 in connection
with the DTM Corporation acquisition, became fully amortized in
2007, when the Company amortized the remaining $948 balance. At
December 31, 2009, the gross acquired technology balance
was $10,367. Acquired technology and the related accumulated
amortization each increased $30 in 2009 from $10,337 in 2008 for
the effect of foreign currency exchange rates reflecting the
impact of amounts recorded in currencies other than the
U.S. dollar on the financial statements of foreign
subsidiaries.
(c) Other Intangible Assets
The Company had $726 and $141 of other net intangible assets,
including internally developed software and non-compete
agreements from acquisitions, as of December 31, 2009 and
2008, respectively. Acquisition activities during the year ended
December 31, 2009 yielded $760 of other intangible assets.
Amortization expense related to such intangible assets was $175,
$1,017, and $279 for the years ended December 31, 2009,
2008 and 2007, respectively.
F-20
3D
Systems Corporation
Notes to Consolidated Financial
Statements (Continued)
The following are the changes in the carrying amount of goodwill
by geographic reporting unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia-
|
|
|
|
|
|
|
U.S.
|
|
|
Europe
|
|
|
Pacific
|
|
|
Total
|
|
|
Balance at January 1, 2008
|
|
$
|
18,605
|
|
|
$
|
22,147
|
|
|
$
|
6,930
|
|
|
$
|
47,682
|
|
Effect of foreign currency exchange rates
|
|
|
|
|
|
|
328
|
|
|
|
|
|
|
|
328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
18,605
|
|
|
|
22,475
|
|
|
|
6,930
|
|
|
|
48,010
|
|
Effect of foreign currency exchange rates
|
|
|
|
|
|
|
312
|
|
|
|
|
|
|
|
312
|
|