3D SYSTEMS CORP - 10-K Annual Report

3D SYSTEMS CORPORATION
(Exact name of Registrant as specified in our charter)

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 ý 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 Registrant's 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. Yes o No ý

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ý No o

The aggregate market value of the Registrant's Common Stock held by non-affiliates of Registrant on June 30, 2004 was $54,191,207. For purposes of this computation, it has been assumed that the shares beneficially held by directors and officers of Registrant were "held by affiliates". This assumption is not to be deemed an admission by these persons that they are affiliates of Registrant.

The number of outstanding shares of the Registrant's Common Stock as of February 28, 2005 was 14,610,309.

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Registrant's definitive proxy statement for our 2005 Annual Meeting of Stockholders 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, 2004

3D Systems Corporation, operating through subsidiaries in the United States, Europe and the Asia-Pacific region, designs, develops, manufactures, markets and services rapid 3-D printing, prototyping and manufacturing systems and related products and materials that enable complex three-dimensional objects to be produced directly from computer data. Our proprietary systems are used to produce physical objects from digital data using commonly available computer-aided design, often referred to as CAD, software and related computer utilities. The ability to produce physical parts from digital art enables customers to quickly and effectively create detailed prototypes or production-quality parts without a significant investment in expensive tooling, greatly reducing the time and cost required to produce prototypes or to customize production parts.

We offer our customers an integrated systems' solution comprised of equipment and related software, consumable materials and customer service. Our extensive solutions' portfolio is based on three distinct and proprietary technology platforms and enables us to offer our customers a way to transform the manner in which they design, develop and manufacture their products.

Our systems are used for applications that include rapid 3-D printing, prototyping and manufacturing. In rapid prototyping applications our systems are used to generate quickly and efficiently product-concept models, functional prototypes, master patterns and expendable patterns for metal casting that are often used as a cost-effective means of evaluating product designs. In 3-D printing applications, our systems are used to produce three-dimensional shapes, primarily for visualizing and communicating concepts and design applications as well as for a variety of other applications, including supply-chain management, modeling, architecture, art, surgical modeling and entertainment.

In rapid manufacturing applications, our systems are used to manufacture end-use parts. In these applications, our systems enable our customers to produce physical parts, tools, jigs, molds, patterns or fixtures directly from a three-dimensional CAD image using our proprietary consumable materials. Customers who adopt our rapid manufacturing solutions avoid the significant costs of complex set-ups and change-overs and eliminate the costs and lead-times associated with tooling. Rapid manufacturing also enables our customers to produce a variety of parts within a single build cycle that have the appearance and characteristics of high-quality injection-molded parts.

We believe that 3-D printing and direct manufacturing represent significant growth opportunities for our business, and we are working to put specific initiatives in place to expand and enhance our manufacturing-capable systems and materials. During 2004, we introduced two manufacturing-capable systems: the Sinterstation® HiQ™ SLS® system for the production of metal and plastic parts and the Viper™ HA SLA® system, a custom "in the ear" hearing aid shell manufacturing system for the hearing aid industry. We also introduced several new engineered materials during 2004 to support our rapid manufacturing initiatives.

Our three technology platforms include our stereolithography or SLA® equipment, our selective laser sintering or SLS® equipment, and our 3-D printing or InVision™ equipment. These systems utilize patented and proprietary stereolithography, selective laser sintering and three-dimensional printing processes to fabricate physical objects using digital data input from CAD software or three-dimensional scanning and sculpting devices. We also blend, market and distribute a wide range of proprietary consumable, engineered plastic and metal materials that we market to produce physical parts using our systems. We augment and complement our own portfolio of engineered materials with materials that

we purchase from third parties under private-label arrangements and other distribution arrangements. We also provide a comprehensive suite of software tools and field services to our customers, ranging from applications' development to installation, warranty and maintenance services.

Stereolithography or SLA® systems convert proprietary engineered materials and composites into solid cross-sections, layer by layer, until the desired fully fused objects are complete. Our SLA® systems are capable of making multiple objects at the same time and are designed to produce objects that have a wide range of sizes and shapes.

Parts produced through stereolithography are known for their durability, 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 other uses, to creating new designs for testing in consumer focus groups.

SLA® systems are designed to build functional models that enable users to share ideas and evaluate concepts; perform form, fit and function testing on working models; build master patterns for metal casting; or quickly produce parts for direct use in working models. 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. Our SLA® systems' portfolio includes the Viper™ system, the SLA® 5000 system, the SLA® 7000 system and our recently introduced Viper™ HA SLA® manufacturing-capable system for the production of in-the-ear hearing aid shells. All of our SLA® systems are capable of producing tools, fixtures, jigs and end-use parts in rapid manufacturing applications, including dental, hearing aid, jewelry and motor-sport applications.

Selective laser sintering, or SLS®, systems convert proprietary engineered powders by melting and fusing, or sintering, these materials into solid cross-sections, layer-by-layer, to produce finished parts. SLS® systems can create parts from a variety of engineered plastic and metal powders and are capable of processing multiple parts in a single build session.

In the second half of 2004, we introduced two new SLS® systems, the Sinterstation® HiQ™ and the Sinterstation® HiQ™ HS SLS® systems. These two new systems succeeded our Vanguard™ and Vanguard™ HS systems. All of our SLS® systems create durable parts from proprietary engineered plastic and metal materials and composites that we market under the DuraForm® brand name. 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 also use our SLS® systems to produce end-use parts directly, which enables them to create customized parts economically without tooling. Examples of rapid manufacturing parts produced by our customers using our SLS® systems include air ducts for aircraft, engine cowling parts for unmanned aerial vehicles ("UMAVs") and in-the-ear hearing aid shells. When used in conjunction with a high-temperature oven, SLS® systems can also create metal parts from several proprietary engineered metal composites that we sell. These parts can be used as tools, functional test models and end-use parts.

The combination of materials' flexibility, part functionality and high throughput of our SLS® technology makes it well suited to rapid manufacturing applications, and much of our current development work is directed at developing applications of our equipment for this environment and expanding the range of applications through the use of proprietary engineered materials.

Our InVision™ 3-D Printer is an advanced, user-friendly office modeling, design communication and precision-casting system. We currently offer the InVision™ 3-D Printer in two models: our standard-resolution model, launched in late 2003, and our high-resolution model, launched in mid-2004. InVision™ 3-D Printers accept digital input from a three-dimensional CAD station, convert the digital file one thickness slice at a time, and jet hot-melted plastic material in an additive layer-by-layer build up to create a solid part.

InVision™ 3-D Printers offer superior finished surfaces, plug-and-play installation, point-and-print functionality and best-in-class part resolution. Together with our VisiJet® materials that are available in five colors, InVision™ 3-D Printers enable designers, engineers, architects and marketers to communicate their concepts frequently, and substantially reduces the time it takes to bring new products to market. Our high-resolution InVision™ HR 3-D Printers can create intricate and complex geometrical shapes that are investment-casting ready for jewelry, dental molding and precision casting applications.

InVision™ 3-D Printers operate much like a desktop two-dimensional printer and are priced economically, responding to a growing demand from customers for affordable parts for design communication and shape analysis. 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.

To help our customers produce ready-to-use parts and functional prototypes, we market several ancillary devices for post-processing and curing of parts produced on our SLA® systems, including our PCA™ post-cure oven and our ProClean™ parts' washer system, and the InVision™ Finisher for our 3-D Printers.

As part of our comprehensive and integrated systems' solutions, we offer proprietary part-preparation software for personal computers and engineering workstations designed to enhance the interface between their available digital data and our systems. Digital data, such as a three-dimensional CAD-produced digital image, is converted within our proprietary software package so that, depending on the specific software package, the image can be viewed, rotated and scaled, and model structures can be added. The software then generates the information to be used by the SLS® system, SLA® system or 3-D Printer to create the solid objects. From time to time, we also work with third parties to develop complementary software for our systems.

As part of our integrated systems' approach to our business, we blend, market, sell and distribute consumable, engineered plastic and metal materials and composites under several proprietary brand names for use in all of our systems. Our family of engineered materials and composites includes proprietary SLA® materials used in our stereolithography systems, engineered hot-melt composites used in our 3-D printer systems, and various proprietary nylon and metal SLS® materials used in our selective laser sintering systems. Our extensive family of proprietary materials is specifically designed for use with our systems to produce high-quality models, prototypes and parts.

We market our stereolithography materials under the Accura® brand, our selective laser sintering materials under the DuraForm®, CastForm™ and LaserForm™ brands, and our materials for our 3-D Printers under the VisiJet® brand. To further complement and expand the range of materials we can

offer to our customers, we also distribute SLA® materials using our brand names that are produced by third parties under private-label arrangements, and we distribute certain materials under recognized third party brand names. In particular, in 2004 we entered into a non-exclusive global distribution arrangement with DSM Somos to distribute its branded materials.

Our family of proprietary stereolithography materials and composites offers a variety of plastic-like performance characteristics and attributes that are designed to mimic specific engineered thermoplastic materials. When converted through our SLA® systems, the proprietary liquid materials that we market and sell turn into a solid surface one layer at the 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. Our Accura® materials include our si 10 general-purpose material, our si 40 high-temperature material, our si 45 high-speed material and our si 50 ABS-like plastic material. We also recently introduced our special high-strength engineered nano-composite Bluestone™ material and our Amethyst™ special precious-metal casting material for jewelry manufacturing.

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 from time to time to develop different types and varieties of materials designed to meet the needs of our customers, and we have entered into arrangements with certain other suppliers to distribute materials they produce.

Our family of proprietary laser sintering materials and composites includes a range of plastic, ceramic and metal materials as well as various composites of these ingredients. Because of the built-in versatility of our laser sintering systems, multiple materials can be processed through the same sintering system.

Our DuraForm® PA and DuraForm® GF materials are used to create rapid manufacturing end-use parts, examples of which include air ducts for aerospace applications and shells for hearing aids. These materials are also used to produce functional prototypes and durable patterns as well as assembly jigs and fixtures. Our CastForm™ investment-casting material is used to create patterns for casting. Our metal LaserForm™ ST-100, ST-200 and A6 steel powders are used by customers to produce functional prototype parts, such as actuators, gears and manifolds, for tooling such as injection molding tooling, and for end-use parts in customized rapid manufacturing applications. Parts made from DuraForm® and LaserForm™ materials are cost-effective and can compete favorably with traditional manufacturing methods, especially where part complexity is high and required quantity is moderate.

Our materials for InVision™ 3-D Printers include our VisiJet® M-100 model material and a compatible VisiJet® S-100 disposable support material that is used in the printing process and then discarded when the model is complete. Both of these materials are distributed to customers in the form of proprietary smart cartridges that are loaded into an InVision™ 3-D Printer in a stack where they are automatically pierced, pumped and ejected sequentially as the printer consumes material. We have specifically developed these materials to meet the consumption, speed and cost requirements of three-dimensional printing applications. We offer VisiJet® materials in five colors (natural, black, grey, blue

and red). For our high-resolution InVision™ HR Printers, we engineered and market special VisiJet® M-200 engineered, high-resolution 3-D printing materials.

We provide a suite of comprehensive customer services and local field support on a worldwide basis for all of our systems. Such services and support include extended system warranties, an extensive menu of annual service agreement options, and a wide variety of software and hardware upgrades and performance enhancement packages for our legacy systems.

Our customer support begins before a system sale with applications' development provided by our applications' engineering team. This same group works to ensure that our systems satisfy customer expectations through customer training and system start-up support. Our global services customer support team co-ordinates system installation, maintenance and call-center hotline support in an effort to ensure that our systems continue to deliver high value to our customers.

We provide services to assist our customers in developing new applications for our technologies, to facilitate adaptation of our technology for the customer's applications, to train customers on the use of newly acquired systems, and to maintain our systems at the customer's site.

Our applications' engineers, who possess technical knowledge in various fields such as casting, molding and tooling, develop applications of our three technologies that are designed to meet specific customer needs. They work with our customers to determine which of our technologies would best meet their requirements. They also consult with customers to develop rapid manufacturing applications for our systems.

We also install new systems at the customer's site, provide warranty and maintenance services and provide the customer with technical support. New SLS®, SLA® and 3-D Printer systems are sold with on-site hardware and software maintenance service that 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 depending on the materials that are included and on the response time for the service. As a key element of warranty and service contract maintenance, our sales engineers provide regularly scheduled preventative maintenance visits to customer sites.

We have customer-support sales engineers in North America, several countries in Europe and in parts of Asia to support our worldwide customer base. We also provide training to our distributors and resellers to enable them to perform these services.

Our customer support group maintains call-center hotlines in the United States and in Europe that are staffed with technical representatives. These hotlines are available during business hours in the U.S. and Europe. These call centers are further supplemented by support from the applications' engineering group.

We distribute spare parts on a worldwide basis to our customers from locations in the United States, Europe, Hong Kong and Japan.

We also offer systems' upgrade kits for sale to existing customers to enable them to take advantage of new or enhanced system capabilities. Our current family of upgrade kits includes kits to upgrade the installed base of our stereolithography equipment and an upgrade kit for our former Vanguard™ SLS® systems that improves productivity. Upgrade kits for our existing systems are an important part of the value that we provide to new customers when they are considering the purchase of our systems.

We operate in North America and in seven other countries in Europe and the Asia-Pacific region, and we distribute our products in those countries as well as in other parts of the world. Sales of our products and services outside of the U.S. have been a rapidly growing part of our business, and they now account for more than 50% of our consolidated revenue. Revenue in countries outside of the United States accounted for 58.5%, 52.8% and 50.6% of consolidated revenue in the years ended December 31, 2004, 2003 and 2002, respectively. See Note 24 to the Consolidated Financial Statements for the year ended December 31, 2004.

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 of this Annual Report on Form 10-K, which information is incorporated herein by reference.

Financial information about geographic areas, including net sales and long-lived assets, for the years in the period ended December 31, 2004 appears in Note 24 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K, which information is incorporated herein by reference.

All of our systems, materials and services are sold through our direct sales organization, which is supported by our dedicated sales and service engineers and our sales' application engineers worldwide. In certain areas of the world where we do not operate directly, we have appointed sales agents and distributors who are authorized to sell our SLA® and SLS® systems and the materials used in them on our behalf. Certain of those agents and distributors also provide service to customers in those geographic areas.

Our InVision™ 3-D Printers, materials and services are sold worldwide through a network of authorized distributors and resellers who are managed and directed by a dedicated team of channel managers.

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 model, mold and prototyping, 3-D printing and rapid manufacturing. Our sales organization is responsible for the sale of our products on a worldwide basis and for the management and co-ordination of our growing network of authorized 3-D printing resellers and certain of our other systems. Our direct sales force consists of sales persons who work throughout North America, Europe and parts of the Asia-Pacific region. Our applications' engineers provide professional services through pre-sales' support and help 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. As of December 31, 2004, our worldwide sales' and service staff consisted of 169 employees.

Our marketing programs also utilize seminars, trade shows, advertising, direct mailings, electronic marketing, telemarketing, literature, web presence, videos, press releases, brochures and customer and application profiles to identify prospects that match a typical user profile. We co-founded and participate in global user groups, which include a substantial number of our customers. These user groups organize annual conferences in the United States, at which we make presentations relating to updates in our technologies and equipment and materials offerings and future ideas and programs we intend to pursue.

Our customers include major companies in a broad range of industries, including manufacturers of automotive, aerospace, computer, electronic, defense, education, consumer and medical products. Purchasers of our systems include original equipment manufacturers or OEMs, government agencies

and universities which generally use our systems for research activities, and independent service bureaus that provide solid imaging services to their customers for a fee. No single customer accounted for more than 5% of our consolidated revenue in the year ended December 31, 2004.

In July 2004, we announced that we had begun to engage selected design and engineering companies to assemble our equipment portfolio, including our InVision™ 3-D Printers and our Viper™ SLA® systems. By the end of 2004, we had outsourced substantially all of our equipment assembly activities to these suppliers. They also carry out quality control procedures on our systems prior to their shipment to customers. As part of these activities, those suppliers are in the process of taking over the responsibility of procuring the components and sub-assemblies that are used in our systems. As this proceeds, we expect that our need to procure or maintain inventories of raw materials, work-in-process and spare parts related to our equipment assembly and maintenance activities will decrease. We purchase finished systems from these suppliers pursuant to forecasts and customer orders that we supply to them.

We produce the VisiJet® materials used in our InVision™ 3-D Printers and certain of our Accura® stereolithography materials at our facilities in Grand Junction, Colorado and Marly, Switzerland, respectively. We also have arrangements with third parties that blend to our specifications certain of the materials that we sell under our own brand names, and we purchase other materials from third parties for resale to our customers.

The components, parts and sub-assemblies that are used in our systems are generally available from several potential suppliers although in the past we have chosen to use only one or a limited number of suppliers for several of the major components, parts and sub-assemblies of our systems, including certain lasers and print heads. We anticipate that, as the outsource suppliers of our systems take over responsibility for the supply chain of components for the systems, they will either retain our existing suppliers or with our approval choose alternate component suppliers that are able to meet the specifications for our equipment.

Although there are several potential suppliers for the raw materials used in the materials and composites that we produce, we have also chosen to use selected suppliers for these raw materials. If we were required in the future to enter into relationships with alternative suppliers, our cost of sales could increase and consequently our gross profit margin could decline.

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 discharge of materials into the environment. We believe that we are in material compliance with such regulations as currently in effect and that continued compliance with them will not have a material adverse effect on our capital expenditures, results of operations or consolidated financial position. Currently, we utilize a cleaning solvent that is the subject of a waiver of environmental provisions within the South Coast Air Quality Management District that includes our Valencia, California facility. This waiver expires on June 30, 2005 at which time we may be required to change to a different cleaning solvent. We are in the process of seeking to obtain a renewal of that waiver. If we are unable to obtain its renewal, we do not expect the impact on our results of operations or consolidated financial position to be material.

We maintain an on-going program of research and development at our facilities in Valencia, California and Marly, Switzerland to improve and expand the capabilities of our systems and related software and materials as well as to develop new systems and materials to enhance our product lines. This includes all significant technology platform developments for SLA®, SLS® and 3-D printing

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 $10.5 million, $9.0 million and $15.4 million in 2004, 2003 and 2002, respectively. We expect that in 2005 our annual research and development expenses will be in a range of 7% to 8% of our consolidated revenue.

At December 31, 2004, we held 370 patents, which include 176 patents in the United States, 136 patents in Europe, 26 patents in Japan and 32 patents in other countries. At that date, we also had 131 pending patent applications, which include 44 in the United States, 42 in Japan, 33 in European countries and 12 in other countries.

The principal patents covering our stereolithography processes expire at varying times ranging from 2005 to 2022. The principal patents covering our selective laser sintering processes expire at varying times ranging from 2006 to 2018. The principal patents covering our 3-D printing processes expire at varying times ranging from 2008 to 2022. We believe the expiration of any of these patents, applications or licenses would not be material to our business or financial position.

We believe that, while our patents and licenses provide us with a competitive advantage, our success depends primarily on our marketing and applications' know-how and on our on-going research and development efforts.

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. Since competition is also based upon innovations in 3-D printing, prototyping and manufacturing systems, our on-going research and development programs are intended to enable us to maintain technological leadership. Certain of the companies producing competing products are well established and may have greater financial resources than we have.

Our principal competitors with respect to our systems are companies that manufacture machines that 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, and plastics' molding equipment, suppliers of traditional machining, milling and grinding equipment, suppliers of Fused Deposition Modeling or FDM technology, suppliers of vacuum casting equipment, and manufacturers of other stereolithography, laser sintering and three-dimensional printing systems. 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. 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.

We also anticipate additional competition with respect to stereolithography technology in North America as a result of a license agreement that we granted to Sony Corporation with respect to our stereolithography technology pursuant to a consent decree that we entered into with the U.S. Department of Justice in connection with our 2001 acquisition of DTM Corporation. We also anticipate additional competition in the United States as a result of the litigation settlement that we entered into with EOS GmbH in February 2004. As part of that settlement, we licensed certain patents to EOS

under which EOS will be able to sell certain systems and other products in the U.S. in exchange for the payment of royalties.

A number of companies currently sell materials that either complement or 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, and through improvements to existing technologies, such as CNC and rotational molding.

At December 31, 2004, we had 361 full-time employees. None of these employees is covered by labor agreements. We believe that our relations with our employees are satisfactory.

Our website address is www.3dsystems.com. The information contained on our website is neither a part of, nor incorporated by reference into, this Annual Report on 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 Securities and Exchange Commission. Various of our corporate governance materials, including our Code of Conduct, Code of Ethics for Senior Financial Executives and Directors, our Corporate Governance Guidelines, the current charters of each of the committees of the Board of Directors and our charter documents and By-Laws, are also available on that website.

Our principal administrative, sales and marketing, product development, technology center and training facilities are located in a 78,320 square-foot general-purpose facility that we lease in Valencia, California. The lease for this property expires on December 31, 2007 and is subject to an optional five-year extension.

We also own a 67,000 square-foot facility in Grand Junction, Colorado. The Grand Junction facility is subject to an industrial development bond financing, and we granted a mortgage and security interest in that facility and certain equipment, personal property and fixtures located at that facility to secure repayment of our obligations under industrial development bonds that were issued to finance the acquisition of that facility. The Grand Junction facility is also encumbered by a second deed of trust in favor of Mesa County Economic Development Council, Inc., securing $0.8 million in allowances that we received.

Our U.S. customer-support operations are located in this facility, and we blend certain of our materials at this facility. In July 2004, we announced that we had begun to engage selected design and manufacturing companies to assemble our equipment portfolio, including our InVision™ 3-D Printers and our Viper™ SLA® systems. As of December 31, 2004, we had discontinued most of our equipment assembly activities at the Grand Junction facility and transferred those activities to the outsourcing companies referred to above. We anticipate completing this program by mid-2005. Currently, we plan to continue our materials' blending and customer support activities in the Grand Junction facility.

We also lease a 7,800 square-foot general-purpose facility in Marly, Switzerland at which we blend stereolithography materials and composites. We also lease sales and service offices in Texas, France, Germany, the United Kingdom, Italy, Japan and Hong Kong.

We believe that the facilities described above are adequate to meet our needs for the immediate future.

We are a party to certain pending or recently settled legal actions and government investigations that are summarized below.

On October 27, 2004, 3D Systems, Inc., one of our wholly owned subsidiaries ("3D California"), filed an action (the "New Jersey Action") in the United States District Court in New Jersey (Case No. 04-5261) alleging, among other things, that the manufacture and sale by Objet Geometries Ltd. of Israel ("Objet") and its North American distributor Stratasys, Inc. ("Stratasys") of Objet's Eden printer products infringes certain patents owned or licensed by 3D California. 3D California seeks a permanent injunction against the future distribution and sale of Objet Eden printer products, monetary damages for past sales, attorneys fees, expenses and costs. On November 19, 2004, Stratasys filed a motion with the Court to transfer this action to the United States District Court for the District of Minnesota. 3D California has opposed this motion, and as of the date of this Annual Report on Form 10-K that motion has not yet been decided by the Court. The defendants have not yet filed an answer to the complaint as of the date of this Annual Report on Form 10-K.

On January 21, 2005, Objet and Stratasys filed a complaint in the United States District Court in Minnesota against 3D California alleging infringement by our InVision™ 3-D Printers of three U.S. patents alleged to have been purchased by Objet from Cubital Ltd. of Israel. The complaint also alleges that the six U.S. patents that 3D California asserted against Objet and Stratasys in the New Jersey Action were not infringed and are invalid. The plaintiffs seek a preliminary and permanent injunction against the sale of our InVision™ 3-D Printers, damages from 3D California, a declaratory judgment that the patents asserted by 3D California in the New Jersey Action are invalid and not infringed by Objet or Stratasys, and costs and attorney fees. The complaint in this action has not been served on 3D California as of the date of this Annual Report on Form 10-K.

On October 27, 2004, Koninklijke DSM N.V. ("DSM") filed a petition in the District Court of Frankfurt, Germany (Case No. 2 06 O 426/04) against our German subsidiary 3D Systems GmbH ("3D Germany") seeking a preliminary injunction against its sale in Germany of our Bluestone™ stereolithography materials on the alleged basis that this product infringes German patent no. DE 69713558 alleged to be jointly owned by DSM, Japan Synthetic Rubber Co. Ltd. ("JSR"), and Japan Fine Coatings Co. Ltd. ("JFC"). On November 25, 2004, 3D Germany filed an action against DSM, JSR and JFC in the Federal Patent Court in Munich, Germany (Case No. 4 Ni 58/04) in which it seeks a judgment of that Court that would invalidate this patent. On December 13, 2004, DSM withdrew the foregoing petition for a preliminary injunction, but subsequently served on 3D Germany a complaint that was originally filed on November 2, 2004 in the Frankfurt District Court (Case No. 2-06 0442/04) alleging claims of infringement based on the same patent. Such complaint seeks injunctive relief preventing the distribution of Bluestone™ materials in Germany and an accounting for sales of that product in Germany. 3D Germany filed a reply to DSM's complaint in which, among other things, it requested dismissal of the complaint and assessment of its costs against DSM. 3D Germany has also asserted various defenses, including that the Bluestone™ material does not infringe any valid claim of the patent and that the asserted claims of the patent are invalid. The Court held an initial hearing on DSM's complaint in Frankfurt on February 9, 2005 for the purpose of addressing the alleged infringement issues and 3D Germany's defenses as well as complying with the mandatory

German Civil Code hearing requirements. At that hearing, the Court made no rulings and set another hearing date for May 11, 2005. The Court instructed the parties to file additional legal briefs prior to that hearing to further address the issues and defenses in the case.

On May 6, 2003, we received a subpoena from the U.S. Department of Justice to provide certain documents to a grand jury investigating antitrust and related issues within our industry. We were advised that we were not a target of the grand jury investigation, and we have not been informed that this status has changed. We have furnished documents required by the subpoena and are otherwise complying with the subpoena.

In October 2003, the SEC commenced a formal investigation into matters pertaining to our historical revenue recognition practices and issued a series of subpoenas requesting documents and testimony. We furnished documents requested by the subpoenas and believe that we complied with them. The SEC took testimony from several current and former employees, but it advised us in August 2004 that it had taken any remaining scheduled testimony off its calendar. On October 29, 2004, we received a letter from the SEC stating that it had closed its investigation and did not intend to recommend any enforcement action with respect to us.

We entered into an agreement on February 4, 2004 with EOS that settled all worldwide disputes and litigation between us and EOS. This litigation was previously described in our Annual Report on Form 10-K for the year ended December 31, 2002 and in our Quarterly Reports on Form 10-Q filed during 2003.

Under the terms of this settlement, both parties waived all claims for damages with respect to their pending disputes and litigation. In addition, both companies licensed various patents to each other. As part of this settlement, EOS is to pay us certain royalties for our patent license, and we may begin selling under our own brand certain laser sintering equipment and related products produced by EOS under an original equipment manufacturer or "OEM" supply agreement.

On February 20, 2004, we settled all litigation with Regent Pacific Management Corporation, all of which previously has been described in our Annual Report on Form 10-K for the year ended December 31, 2002 and our Quarterly Reports on Form 10-Q filed during 2003. We paid $0.5 million to Regent Pacific in connection with this settlement.

On September 27, 2004, we agreed to settle the litigation brought against us in Japan by Hitachi Zosen, a distributor of products produced by EOS, by paying 40 million Japanese yen (approximately $0.4 million) to Hitachi Zosen. That litigation had previously been described in our Annual Report on Form 10-K for the year ended December 31, 2003 and in our Quarterly Reports on Form 10-Q filed during 2004.

On September 30, 2004, the Court in this action that had been pending in the U.S. District Court, Central District of California, against Aaroflex, Inc. issued a decision granting the motion that we filed,

as the plaintiff, in March 2004 to dismiss this case without prejudice. The Court also denied defendant's request that the Court award $0.8 million in costs to the defendant. This litigation had previously been disclosed in our Annual Report on Form 10-K for the year ended December 31, 2003 and in our Quarterly Reports on Form 10-Q filed during 2004.

We are also involved in various other legal actions incidental to our business. Our management believes, 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.

No matters were submitted to a vote of security holders during the fourth quarter of 2004.

The information appearing in the table below sets forth the current position or positions held by each of our executive officers and his age as of March 1, 2005. All of our officers serve at the pleasure of the Board of Directors. There are no family relationships among any of our officers or directors.

Name and Current Position		Age as of March 1, 2005
Abraham N. Reichental President and Chief Executive Officer		48
Charles W. Hull Executive Vice President, Chief Technology Officer		65
Assad A. Ansari Vice President		58
Stephen M. Goddard Vice President		41
Robert M. Grace, Jr. Vice President, General Counsel and Secretary		58
Fred R. Jones Vice President and Chief Financial Officer		57
Donald R. Kayser, Jr. Vice President		44
Kevin McAlea Vice President		46
Ray R. Saunders Vice President		56

Mr. Reichental was elected President and Chief Executive Officer effective September 19, 2003. Previously, he was employed by Sealed Air Corporation, a global manufacturer of food, protective and specialty packaging materials, for 22 years in various technical, marketing and operating positions, most recently serving as a corporate officer and Vice President and General Manager of the Shrink Packaging Division from May 2001 until September 2003 and from June 1999 until April 2001 as Vice President Asia-Pacific.

Mr. Hull is a founder of the company and has served in various executive positions since 1986.

Dr. Ansari joined us on July 19, 2004 and was elected a Vice President effective December 9, 2004. Prior to joining us in 2004, he served as Vice President, Engineering at Giddings & Lewis, L.L.C., a manufacturer of machine tools, for more than five years.

Mr. Goddard joined us on October 27, 2003 and was elected a Vice President effective December 9, 2004. Prior to joining us, he was employed by Sealed Air Corporation from May 2002 to October 2003 in various operational and manufacturing performance-improvement leadership roles. For the previous four years, he worked for McKinsey & Company, a business consulting firm.

Mr. Grace was elected Vice President, General Counsel and Secretary effective November 3, 2003. Previously, he was employed by Sealed Air Corporation for 22 years, most recently serving as a Special Counsel from 1996 to 2003 and previously as General Counsel and Secretary.

Mr. Jones was elected Vice President and Chief Financial Officer effective December 26, 2003. From March 2001 to December 2003, he was an independent financial consultant providing financial consulting services for privately held and publicly held companies. Prior to that, he served as Vice President and Chief Financial Officer of Thomas & Betts Corporation, a manufacturer and marketer of electrical and electronic connectors.

Mr. Kayser joined us on January 19, 2004 and was elected a Vice President effective December 9, 2004. Prior to joining us, he was employed by Kemet Electronics Corporation from May 2002 until January 2004 in positions where he led that firm's sales and marketing organization in Asia. Previously, he was employed for more than 14 years by Sealed Air Corporation where he held various general management and sales and marketing positions, primarily in Asia.

Dr. McAlea was elected a corporate Vice President in May 2003 and, from September 2001 to May 2003, served as Vice President and General Manager, Europe. For more than five years prior to September 2001, he served in marketing, technical and executive positions with DTM Corporation, which we acquired in August 2001. At DTM, his last position was Vice President, Marketing and Business Development.

Mr. Saunders was elected a corporate Vice President in May 2003 and, from July 2002 to May 2003, served as Vice President of Operations and Development. Previously, he served as Vice President of Manufacturing beginning in September 2000. For more than five years prior to September 2000, he served as Director of Operations for Axiohm Transaction Solutions, Inc., a manufacturer and seller of specialty printers and related products, where he was responsible for the manufacturing operations of their San Diego Division.

The following table sets forth, for the periods indicated, the range of high and low prices of our Common Stock as quoted on the NASDAQ Stock Market's National Market. Our stock trades under the symbol "TDSC".

Year	Period	High		Low
2003	First Quarter	$	10.15	$	4.10
	Second Quarter		7.90		4.00
	Third Quarter		9.43		6.37
	Fourth Quarter		10.60		8.10
2004	First Quarter		14.08		9.90
	Second Quarter		13.31		10.66
	Third Quarter		12.19		10.80
	Fourth Quarter		20.14		10.89

As of February 28, 2005, our outstanding Common Stock was held of record by approximately 380 stockholders.

We do not currently pay 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 payment of dividends on our Common Stock will be 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 declaration of dividends on our Common Stock is restricted by the terms of the Series B Convertible Preferred Stock, as described below, and may be restricted by the terms of any class or series of preferred stock that we may issue in the future, although we have no current intention to issue any additional class or series of preferred stock. The declaration of dividends on our Common Stock also may be restricted by the provisions of credit agreements or other financing documents that we may enter into from time to time, including the provisions of the credit agreement that we entered into with Silicon Valley Bank as of June 30, 2004.

Until May 5, 2004, holders of our Series B Convertible Preferred Stock were entitled to receive, when, as and if declared by the Board of Directors, but only out of funds legally available therefor, cumulative cash dividends at the rate of $0.48 per share per year. Effective at the close of business on May 5, 2004, the cumulative dividend rate on the Series B Convertible Preferred Stock increased to $0.60 per share per year, when, as and if declared by the Board of Directors, but only out of funds that are legally available therefor.

Dividends on the Series B Convertible Preferred Stock, when declared, are payable semi-annually in May and November of each year so long as the Series B Convertible Preferred Stock remains outstanding. No dividends may be paid on any shares of Common Stock or on shares of any other stock ranking junior to the Series B Convertible Preferred Stock unless all accrued and unpaid dividends have first been declared and paid in full with respect to the Series B Convertible Preferred Stock. All dividends required to have been paid on the Series B Convertible Preferred Stock have been declared and paid through December 31, 2004.

The selected consolidated financial data set forth below for the five years ended December 31, 2004 has been derived from our audited consolidated financial statements. Our consolidated balance sheet and the related consolidated statements of operations, stockholders' equity, cash flows and comprehensive income (loss) for the two years in the period ended December 31, 2004 have been audited by BDO Seidman, LLP, our independent registered public accounting firm for those years. Our consolidated balance sheet and the related consolidated statements of operations, stockholders' equity, cash flows and comprehensive income (loss) for the year ended December 31, 2002 were audited by Deloitte & Touche LLP, our independent registered public accounting firm for such year.

You should read this information in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations, with the notes to the table of Selected Consolidated

Financial Data, and with our consolidated financial statements and the notes thereto included in this Annual Report on Form 10-K.

		Year ended December 31, 2001
		As originally reported			Adjustments			As previously restated
Consolidated revenue		$	121,224		$	(2,484	)	$	118,740
Net income (loss)		$	(1,341	)	$	(1,106	)	$	(2,357	)
Net income (loss) per share available to common stockholders:
	Basic	$	(0.11	)	$	(0.08	)	$	(0.19	)
	Diluted	$	(0.11	)	$	(0.08	)	$	(0.19	)

ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Delaware (State or other jurisdiction of incorporation or organization)		95-4431352 (I.R.S. Employer Identification No.)
26081 Avenue Hall Valencia, California 91355 (Address of principal executive offices and zip code)
(661) 295-5600 (Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.001 per share

PART I			3
	Item 1.	Business	3
	Item 2.	Properties	11
	Item 3.	Legal Proceedings	12
	Item 4.	Submission of Matters to a Vote of Security Holders	14
PART II			15
	Item 5.	Market for Our Common Equity and Related Stockholder Matters	15
	Item 6.	Selected Financial Data	16
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	58
	Item 8.	Financial Statements and Supplementary Data	60
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	61
	Item 9A.	Controls and Procedures	61
	Item 9B.	Other Information	62
PART III			62
	Item 10.	Directors and Executive Officers	62
	Item 11.	Executive Compensation	62
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	62
	Item 13.	Certain Relationships and Related Transactions	63
	Item 14.	Principal Accountant Fees and Services	63
PART IV			64
	Item 15.	Exhibits and Financial Statement Schedules	64

			Year Ended December 31,
			2004			2003			2002			2001(1),(2)			2000(2)
			(in thousands of dollars, except per share amounts)
Consolidated Statement of Operations Data:
Consolidated Revenue
	Systems and other products		$	45,977		$	41,081		$	49,420		$	53,925		$	54,590
	Materials			37,999			32,003			31,619			30,633			25,267
	Services			41,403			36,931			34,922			34,182			29,429

		Total		125,379			110,015			115,961			118,740			109,286
Gross profit(3)				56,091			43,142			46,621			51,501			52,588
Income (loss) from operations(4)				5,601			(14,974	)		(21,430	)		(2,316	)		12,064
Net income (loss) before income taxes				3,622			(17,876	)		(5,957	)		(3,349	)		12,179
Cumulative effect of changes in accounting principles(3),(4)				—			(7,040	)		—			—			—
Net income (loss)				2,561			(26,023	)		(14,866	)		(2,357	)		7,870
Series B convertible preferred stock dividends(5)				1,534			867			—			—			—
Net income (loss) available to common stockholders				1,027			(26,890	)		(14,866	)		(2,357	)		7,870
Net income (loss) available to common stockholders per share:(6)
	Basic		$	0.08		$	(2.10	)	$	(1.16	)	$	(0.19	)	$	0.66
	Diluted		$	0.07		$	(2.10	)	$	(1.16	)	$	(0.19	)	$	0.61
Consolidated Balance Sheet Data:
Working capital net asset (net liability)			$	28,324		$	18,823		$	(8,608	)	$	16,008		$	44,275
Total assets				131,496			131,465			132,233			164,942			109,623
Current portion of long-term debt				180			165			10,500			3,135			120
Long-term debt, less current portion				26,449			36,629			14,090			25,640			4,375
Series B convertible preferred stock(5)				15,196			15,210			—			—			—
Total stockholders' equity				53,064			36,698			59,866			78,429			71,522
Consolidated Cash Flow Data:
Net cash provided by operating activities			$	2,928		$	1,182		$	1,314		$	6,649		$	5,126
Net cash used in investing activities				(1,935	)		(2,131	)		(11,015	)		(58,088	)		(2,644	)
Net cash provided by financing activities				1,147			22,229			5,843			40,907			4,159
Other Data:
EBIT(7)			$	6,112		$	(21,926	)	$	(3,321	)	$	(1,749	)	$	12,514
Depreciation and amortization				6,956			8,427			9,902			7,704			6,245
Interest expense				2,490			2,990			2,636			1,600			335
EBITDA(7)				13,068			(13,499	)		6,581			5,955			18,759
Capital expenditures				781			874			3,210			3,317			4,893