VALENCIA, Calif.—(BUSINESS WIRE)—Aug. 9, 2006— 3D Systems Corporation (Nasdaq: TDSC), a leading provider of Rapid 3-D Printing, Prototyping and Manufacturing solutions, announced that it plans to file today with the Securities and Exchange Commission ("SEC") a Form 12b-25 indicating that it will be unable to file its Quarterly Report on Form 10-Q by today's initial filing deadline. A 12b-25 filing provides the company an automatic five-day extension of the time for the company to file its Quarterly Report on Form 10-Q and still be considered timely under SEC rules.
The company also delayed issuing its second-quarter operating
results but is reporting today its preliminary expectations for its
operating results for the second quarter of 2006. The company will
hold a conference call and simultaneous webcast to discuss the delay
in filing its Form 10-Q and its preliminary second quarter results
today, August 9, 2006, at 5:30 a.m. Pacific Time (8:30 a.m. Eastern
The company's delay in completing its financial statements for the
second quarter and first six months of 2006 is due primarily to
disruptions arising from the implementation of its new enterprise
resource planning ("ERP") system and other disruptions in its supply
chain activities arising primarily from the outsourcing of logistics
and warehousing of spare parts in the second quarter of 2006.
Due to these disruptions, despite diligent efforts, the company
could not complete the work necessary to file its Form 10-Q by today's
initial due date or to release its final second-quarter operating
results. The company intends to file its Form 10-Q and issue its
second-quarter operating results as soon as practicable.
The company began operating its new ERP system in the U.S. and in
most of Europe during the second quarter of 2006, and it has
experienced unforeseen disruptions and delays from operating the
These disruptions made it difficult for the company to enter and
process customer orders, procure and manage inventory, schedule orders
for production and shipping and invoice finished products to customers
during the second quarter. Therefore, the company expects to report
revenue for the second quarter of 2006 of approximately $28 million, a
15% decrease from revenue reported for the second quarter of 2005.
Difficulties with the ERP system also have resulted in delays in
testing and analyzing certain data recorded in the ERP system
necessary to complete the financial statements required for the 10-Q
Also as a result of these disruptions, the company currently
expects to report that it ended the second quarter with an
approximately $9.8 million order backlog. Of this amount,
approximately $8.3 million in orders, primarily for systems and
materials, were generated and planned for shipment during the second
quarter. The company expects to catch up on this high backlog as it
resolves the remaining disruptions, which the company believes have
eased substantially since the beginning of July.
The company currently expects that its final second quarter
results will reflect that the supply chain and ERP-system disruptions
experienced during the second quarter adversely impacted revenue from
systems and services in the second quarter, with significant
reductions in unit sales volume in each of those product and service
classes. The company also expects to report that revenue declined
during the second quarter of 2006 in each geographic area in which it
conducts business, due primarily to the overall decline in unit sales
The company also expects to report that sales of its engineered
materials and composites were only mildly impacted by the ERP and
supply chain disruptions, reflecting the relative simplicity of the
materials' portfolio sourcing and logistics for these products.
The company also expects to report a significant decline in gross
profit for the second quarter of 2006 compared to the gross profit
reported for the second quarter for 2005, and a net loss available to
common stockholders in the range of $0.62 to $0.72 per diluted share.
These preliminary results reflect the company's lower revenue,
higher warranty costs and increased and extraordinary expenses
associated with accommodations that it extended to customers whose
orders or repairs were delayed by the ERP system and supply-chain
disruptions and resource constraints on the company's service
organization, as well as increased costs incurred to remedy or
compensate customers for stability issues with certain new equipment
The company also expects to report that, except for $2.2 million
of restructuring costs in the second quarter of 2006 associated with
its planned relocation to Rock Hill, South Carolina, expenses related
to its ERP implementation that cannot be capitalized and higher
investments in R&D projects, operating expenses increased slightly
compared to those reported for the second quarter of 2005.
The higher research and development expenses reflect the company's
continued high levels of investment in new product development. The
company's restructuring costs related to the Rock Hill relocation
project currently are within the range of the company's previous
"The second quarter of 2006 was a particularly challenging quarter
for us," said Abe Reichental, 3D Systems' president and chief
executive officer. "Although we are pleased with the progression of
our booking of orders during the second quarter, we are deeply
disappointed that disruptions in delivery and service resulting from
certain of our key initiatives to improve our operations, promote
growth and improve our customer's bottom line let down some of our
valued customers and negatively impacted our operating results.
"During the second quarter, we experienced a number of temporary
challenges relating to the ERP implementation, the start-up of our
recently outsourced logistics and warehousing activities, and the
relocation of our operations, including the need to hire and train new
employees who are not yet fully experienced with our new ERP system or
fully familiar with our business," continued Reichental.
"Specifically, we began to operate our new ERP system in the U.S.
on May 1, 2006 and in most of Europe in mid-June 2006. While we expect
the ERP system to ultimately improve our business processes,
efficiency and control environment, following the commencement of the
operation of the system, we encountered disruptions in processing
transactions in the system that affected our ability to enter and
process customer orders, procure and manage inventory, schedule orders
for production and shipping and invoice finished products to
customers," continued Reichental.
"We also experienced significant disruptions in our supply chain
activities that led to shortages of parts and materials, resulting in
loss of parts and materials' revenue, a consequent loss of service
revenue, higher service and expediting costs and the need to
compensate customers who were adversely affected by these shortages,"
continued Reichental. "These shortages also delayed shipments of
finished products, which reduced revenue recognized in the second
quarter and resulted in an estimated $8.3 million of backlog for new
orders placed during the second quarter that we were unable to ship
during the quarter.
"In addition, difficulties with the new ERP system also impacted
our ability to test and analyze certain data recorded in the ERP
system necessary to complete the financial statements required for the
10-Q filing, which caused us to file for a filing extension permitted
by the SEC's rules," said Reichental.
"As we have said previously, our new, sophisticated, advanced
manufacturing-capable Sinterstation(R) Pro, Viper(TM) Pro and 3-D
Printing systems, with their broader range of capabilities, continued
to require more extensive commissioning and training to achieve
operating stability and operating potential for some customers. As a
result of the high volume of sales of these systems that we have
enjoyed in recent quarters, and the continued need for additional
commissioning and training time, we also have experienced field
service resource constraints and equipment stability issues that have
delayed the start-up of some systems," continued Reichental.
"During the second quarter, we continued to address these issues,
and we believe we made meaningful progress by working closely with our
customers to resolve system stability issues in a mutually beneficial
manner. We also intensified our own internal training and provided
more extensive customer training, support and installation activities
than the services we traditionally provide with our legacy systems.
Nonetheless, we encountered higher warranty and related costs that
adversely affected our gross profit in the second quarter and first
six months of 2006," said Reichental.
"Notwithstanding all of these challenges, we are heartened by the
fact that we ended the quarter with a significantly larger backlog of
new orders compared to our historical experience, which we believe
suggests that our lower than anticipated results in the second quarter
were symptoms of the disruptions we experienced rather than a
fundamental problem with our business," continued Reichental.
"We are pleased that in the course of the past six weeks the
focused corrective action plan that we have implemented enabled us to
process and ship the majority of the new order backlog we had at the
end of the second quarter. Although there can be no assurance that all
of these outstanding orders ultimately will result in sales to and
revenue from customers, we believe that the backlog and our progress
in shipping it suggests, first, that the demand for our products and
services remains strong and, but for the problems we experienced in
fulfilling orders, would have contributed to a significantly better
second quarter than we experienced and, second, that we are making
real progress in correcting these disruptions," concluded Reichental.