UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended March 28, 2003 |
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File No. 0-22250
3D SYSTEMS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
| DELAWARE | 95-4431352 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
| 26081 AVENUE HALL VALENCIA, CALIFORNIA |
91355 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(661) 295-5600
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
Shares of Common Stock, par value $0.001, outstanding as of June 30, 2003: 12,734,301
3D SYSTEMS CORPORATION
| Page | ||||||
| PART I. | FINANCIAL INFORMATION |
3 | ||||
| ITEM 1. | Financial Statements |
3 | ||||
| Consolidated Balance Sheets as of March 28, 2003 (unaudited) and December 31, 2002 |
3 | |||||
| 4 | ||||||
| 5 | ||||||
| 7 | ||||||
| 8 | ||||||
| ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 | ||||
| 30 | ||||||
| 34 | ||||||
| ITEM 3. | 42 | |||||
| ITEM 4. | 43 | |||||
| PART II. | OTHER INFORMATION | 45 | ||||
| ITEM 1. | 45 | |||||
| ITEM 6. | 47 | |||||
2
3D SYSTEMS CORPORATION
As of March 28, 2003 and December 31, 2002
(in thousands)
| (unaudited) | (audited) | |||||||
| March 28, 2003 |
December 31, 2002 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 3,510 | $ | 2,279 | ||||
| Accounts receivable, less allowances for doubtful accounts of $2,607 and $3,068 |
20,133 | 27,420 | ||||||
| Current portion of lease receivables |
322 | 322 | ||||||
| Inventories, net of reserves of $2,111 and $1,876 |
13,997 | 12,564 | ||||||
| Prepaid expenses and other current assets |
3,169 | 3,687 | ||||||
| Total current assets |
41,131 | 46,272 | ||||||
| Property and equipment, net |
14,138 | 15,339 | ||||||
| Licenses and patent costs, net |
16,051 | 14,960 | ||||||
| Lease receivables, less current portion and net of allowance of $463 and $414 |
459 | 553 | ||||||
| Acquired technology, net |
7,240 | 7,647 | ||||||
| Goodwill |
44,499 | 44,456 | ||||||
| Other assets, net |
2,682 | 3,006 | ||||||
| $ | 126,200 | $ | 132,233 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Line of credit |
$ | 6,350 | $ | 2,450 | ||||
| Accounts payable |
10,173 | 10,830 | ||||||
| Accrued liabilities |
14,618 | 15,529 | ||||||
| Current portion of long-term debt |
9,755 | 10,500 | ||||||
| Customer deposits |
700 | 801 | ||||||
| Deferred revenues |
14,009 | 14,770 | ||||||
| Total current liabilities |
55,605 | 54,880 | ||||||
| Other liabilities |
3,275 | 3,397 | ||||||
| Long-term debt, less current portion |
4,010 | 4,090 | ||||||
| Subordinated debt |
10,000 | 10,000 | ||||||
| Total liabilities |
72,890 | 72,367 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, authorized 5,000 shares, none issued |
— | — | ||||||
| Common stock, authorized 25,000 shares, issued and outstanding 12,734 and issued and outstanding 12,725 |
13 | 13 | ||||||
| Capital in excess of par value |
84,970 | 84,931 | ||||||
| Notes receivable from officers for purchase of stock |
(59 | ) | (59 | ) | ||||
| Accumulated deficit |
(28,290 | ) | (21,419 | ) | ||||
| Accumulated other comprehensive loss |
(3,324 | ) | (3,600 | ) | ||||
| Total stockholders’ equity |
53,310 | 59,866 | ||||||
| $ | 126,200 | $ | 132,233 | |||||
See accompanying notes to consolidated financial statements.
3
3D SYSTEMS CORPORATION
Consolidated Statements of Operations
For the Three Months Ended
March 28, 2003 and March 29, 2002
(in thousands, except per share amounts)
(unaudited)
| Three months ended |
||||||||
| March 28, 2003 |
March 29, 2002 As restated |
|||||||
| Sales: |
||||||||
| Products |
$ | 14,737 | $ | 19,261 | ||||
| Services |
8,280 | 8,253 | ||||||
| Total sales |
23,017 | 27,514 | ||||||
| Cost of sales: |
||||||||
| Products |
8,501 | 10,880 | ||||||
| Services |
7,021 | 6,314 | ||||||
| Total cost of sales |
15,522 | 17,194 | ||||||
| Gross profit |
7,495 | 10,320 | ||||||
| Operating expenses: |
||||||||
| Selling, general and administrative |
10,656 | 10,970 | ||||||
| Research and development |
2,600 | 3,928 | ||||||
| Total operating expenses |
13,256 | 14,898 | ||||||
| Loss from operations |
(5,761 | ) | (4,578 | ) | ||||
| Interest and other income (expense), net |
(894 | ) | (700 | ) | ||||
| Gain on arbitration settlement |
— | 18,464 | ||||||
| (Loss) income before provision for income taxes |
(6,655 | ) | 13,186 | |||||
| Provision for income taxes |
216 | 4,492 | ||||||
| Net (loss) income |
$ | (6,871 | ) | $ | 8,694 | |||
| Shares used to calculate basic net (loss) income per share |
12,724 | 13,132 | ||||||
| Basic net (loss) income per share |
$ | (0.54 | ) | $ | 0.66 | |||
| Shares used to calculate diluted net (loss) income per share |
12,724 | 14,651 | ||||||
| Diluted net income (loss) per share |
$ | (0.54 | ) | $ | 0.59 | |||
See accompanying notes to consolidated financial statements.
4
3D SYSTEMS CORPORATION
Consolidated Statements of Cash Flows
For the Three Months Ended
March 28, 2003 and March 29, 2002
(in thousands)
(unaudited)
| Three months ended |
||||||||
| March 28, 2003 |
March 29, 2002 As restated |
|||||||
| Cash flows from operating activities: |
||||||||
| Net (loss) income |
$ | (6,871 | ) | $ | 8,694 | |||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
||||||||
| Deferred income taxes |
— | 4,547 | ||||||
| Gain on arbitration settlement (including $1,536 included in S,G&A for legal reimbursement) |
— | (20,310 | ) | |||||
| Depreciation and amortization |
2,248 | 2,032 | ||||||
| Adjustment to allowance accounts |
299 | 130 | ||||||
| Adjustment to inventory reserve |
494 | (40 | ) | |||||
| Loss on disposition of property and equipment |
120 | 55 | ||||||
| Changes in operating accounts, excluding acquisition: |
||||||||
| Accounts receivable |
7,146 | 10,831 | ||||||
| Lease receivables |
94 | 630 | ||||||
| Inventories |
(1,499 | ) | (254 | ) | ||||
| Prepaid expenses and other current assets |
548 | 278 | ||||||
| Other assets |
189 | 260 | ||||||
| Accounts payable |
(680 | ) | (486 | ) | ||||
| Accrued liabilities |
(963 | ) | (2,975 | ) | ||||
| Customer deposits |
(101 | ) | 969 | |||||
| Deferred revenues |
(797 | ) | (486 | ) | ||||
| Other liabilities |
(148 | ) | (88 | ) | ||||
| Net cash provided by operating activities |
79 | 3,787 | ||||||
| Cash flows from investing activities: |
||||||||
| Investment in OptoForm SARL |
— | (1,200 | ) | |||||
| Purchase of property and equipment |
(186 | ) | (1,189 | ) | ||||
| Additions to licenses and patents |
(1,727 | ) | (738 | ) | ||||
| Software development costs |
— | (140 | ) | |||||
| Net cash used for investing activities |
(1,913 | ) | (3,267 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Exercise of stock options and purchase plan |
39 | 119 | ||||||
| Borrowings |
7,000 | 13,600 | ||||||
| Repayment of long-term debt |
(3,925 | ) | (14,892 | ) | ||||
| Net cash provided by (used for) financing activities |
3,114 | (1,173 | ) | |||||
| Effect of exchange rate changes on cash |
(49 | ) | 247 | |||||
| Net increase (decrease) in cash and cash equivalents |
1,231 | (406 | ) | |||||
| Cash and cash equivalents at the beginning of the period |
2,279 | 5,948 | ||||||
| Cash and cash equivalents at the end of the period |
$ | 3,510 | $ | 5,542 | ||||
See accompanying notes to consolidated financial statements.
5
Supplemental schedule of non-cash investing and financing activities:
During the three months ended March 28, 2003 and March 29, 2002, the Company transferred $0.6 million and $1.3 million of property and equipment from inventories to fixed assets, respectively. Additionally, $0.7 million and $0.9 million of property and equipment was transferred from fixed assets to inventories for the three months ended March 28, 2003 and March 29, 2002.
In conjunction with the $22 million arbitration settlement with Vantico, which was settled through the return of shares to the Company, the Company allocated $1.7 million to a put option which is included as an addition to stockholders’ equity in the first quarter of 2002.
6
3D SYSTEMS CORPORATION
Consolidated Statements of Comprehensive Income (Loss)
For the Three Months Ended
March 28, 2003 and March 29, 2002
(in thousands)
(unaudited)
| Three months ended | |||||||
| March 28, 2003 |
March 29, 2002 As restated (see Note 13) | ||||||
| Net (loss) income |
$ | (6,871 | ) | $ | 8,694 | ||
| Foreign currency translation |
276 | 356 | |||||
| Comprehensive (loss) income |
$ | (6,595 | ) | $ | |||