3D Systems Releases Restated Financial Statements

ROCK HILL, S.C.—(BUSINESS WIRE)—February 2, 2007— 3D Systems Corporation (NASDAQ: TDSC), a leading provider of Rapid 3-D Printing, Prototyping and Manufacturing solutions, released its restated financial statements for the first and second quarters of 2006 and prior periods today. Separately, the company also reported its operating results for the third quarter and first nine months of 2006. The company also filed its Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 with the SEC today.

Restatement

As the company announced on December 14, 2006, it has restated its annual financial statements for its 2004 and 2005 calendar years. The effect of these restatements was to increase net income available to common stockholders in 2004 by $0.5 million, or $0.04 per share on a fully diluted basis, and to decrease net income available to common stockholders in 2005 by $0.7 million, or $0.05 per share on a fully diluted basis. These amounts are consistent with the expectations that the company announced last month. Each quarterly period in 2005 was also restated, and the effect of those restatements has been included in the 2005 operating results discussed below.

The company has also restated its financial statements for the first two quarters of 2006. The effect of these restatements was to increase net loss available to common stockholders in the first quarter of 2006 by $0.7 million, or $0.05 per share, and to increase net loss available to common stockholders in the second quarter of 2006 by $2.6 million, or $0.16 per share. These amounts are also consistent with the expectations that the company announced last month.

As the company previously disclosed, it identified the errors that led to these restatements in the third quarter of 2006. These errors primarily include errors in recording customer credits and deposits and to a lesser extent (i) errors identified in reconciling fixed asset and construction-in-progress accounts and related depreciation and (ii) errors identified during the reconciliation of a number of income and expense accounts and accrued liabilities. As noted above, in the restatements, these errors primarily impacted the first and second quarters of 2006. Certain of the errors identified with respect to the 2004 and 2005 financial statements reflected the effect on those years of the 2006 errors that the company identified and the remainder of them primarily included unrelated previously unadjusted audit differences with respect to 2004 and 2005 that were evaluated when they were identified in prior periods and determined not to be material to the financial statements at that time. The company recorded these unadjusted differences in the restatement of the 2004 and 2005 financial statements.

The company identified the errors in the 2006 financial statements primarily as a result of its efforts to remediate the material weaknesses that it previously identified and disclosed with respect to its second quarter 2006 financial statements as well as through its ongoing efforts (a) to implement its new ERP system, (b) to reconcile the records in its new ERP system and those in its legacy systems, and (c) to test its internal controls in the context of the new ERP system environment. In connection with restating its financial statements, the company identified additional material weaknesses that it is working to remediate. These material weaknesses, and the actions the company is taking diligently to remediate them, are discussed in greater detail in the Quarterly Report on Form 10-Q that the company filed with the SEC today.

The company encourages anyone who is interested in a detailed analysis of the restatement to read the company's Form 10-Q for the quarter ended September 30, 2006.

Operating Results

In line with its December 14, 2006 announcement, the company reported revenue for the third quarter of 2006 of $31.5 million, a 2.2% decrease from restated revenue reported for the third quarter of 2005. Revenue for the first nine months of 2006 was $92.2 million, a 2.9% decrease from restated revenue reported for the first nine months of 2005. On a sequential-quarter basis, revenue increased by 16.0% over the company's second-quarter 2006 revenue, reflecting the early impact of the corrective action plan that the company began to implement in July 2006.

Gross profit for the third quarter of 2006 declined to $10.7 million from $14.7 million in the third quarter of 2005 as restated and declined to $30.2 million from $41.7 million in the first nine months of 2005 as restated.

Net loss available to common stockholders for the third quarter of 2006 was $11.3 million, or $0.61 per fully diluted share, compared to $0.5 million of net income available to common stockholders, or $0.03 per fully diluted share, in the 2005 quarter as restated. Net loss available to common stockholders for the first nine months of 2006 was $24.7 million, or $1.48 per fully diluted share, compared to $1.8 million of net income available to common stockholders, or $0.11 per fully diluted share, in the first nine months of 2005 as restated. These net losses in the 2006 periods included $2.5 million of non-cash income tax expense arising out of the recording of a valuation allowance at September 30, 2006 against the net deferred tax asset that the company recorded at December 31, 2005 as a result of the company's changed outlook.

Consistent with its December 14, 2006 announcement, the company's operating performance in the third quarter and first nine months of 2006 was largely a reflection of the disruptions that it encountered when it started up its new enterprise resource planning ("ERP") system in the U.S. and in most of Europe during the second quarter of 2006, many of which continued to have an adverse effect on its operations in the third quarter of 2006 with lessening impact as the third quarter ended. These disruptions, as well as other interruptions in its supply chain activities arising primarily from the outsourcing of logistics and warehousing of spare parts to a third-party logistics provider, more than offset the company's stronger performance in the first quarter of 2006. 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 and, to a lesser extent, during the third quarter. The effect of these factors eased toward the end of the third quarter of 2006 as the company made progress in its remediation efforts and corrective action plan.
                         Operating Highlights
             Third Quarter and First Nine Months of 2006
             ($ in millions except for per share amounts)
----------------------------------------------------------------------
                       Third Quarter            First Nine Months
                 -------------------------- --------------------------
   Operating               2005                       2005
    Highlights     2006  Restated % Change    2006  Restated % Change
------------------------ -------- --------- ------- -------- ---------
Revenue           $31.5    $32.2    (2%)     $92.2    $95.0    (3%)
------------------------ -------- --------- ------- -------- ---------
Gross profit      $10.7    $14.7             $30.2    $41.7
% of Revenue         34%      46%   (27%)       33%      44%   (28%)
------------------------ -------- --------- ------- -------- ---------
Operating
 expenses         $19.4    $13.4             $50.5    $37.5
% of Revenue         62%      42%    45%        55%      39%    35%
------------------------ -------- --------- ------- -------- ---------
Operating income
 (loss)           $(8.7)    $1.2            $(20.4)    $4.2
% of Revenue         NM        4%    NM         NM        4%    NM
------------------------  --------  ---------  -------  --------  ---------
Net  income  (loss)
  available  to
  common
  stockholders        $(11.3)        $0.5                        $(24.7)        $1.8
%  of  Revenue                  NM                2%        NM                  NM                2%        NM
------------------------  --------  ---------  -------  --------  ---------
Diluted  income
  (loss)  per  share
  available  to
  common
  stockholders        $(0.61)      $0.03          NM          $(1.48)      $0.11          NM
------------------------  --------  ---------  -------  --------  ---------
Unrestricted  cash    $5.3        $26.2        (80%)          $5.3        $26.2        (80%)
------------------------  --------  ---------  -------  --------  ---------
Depreciation  and
  amortization            $1.3          $1.6                            $4.4          $4.8
%  of  Revenue                    4%              5%      (6%)                  5%              5%      (8%)
------------------------  --------  ---------  -------  --------  ---------
 


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