“We are in the midst of working on additional gross profit improvement plan objectives, which include beginning to move certain third-party logistics activities back in-house and further improving the quality of certain warranty parts that third parties supply to us.”
Operating expenses did continue a downward trend and were $1.3 million lower than in the first quarter of 2007, primarily due to lower selling, general and administrative expenses that were partially offset by higher research and development expenses. SG&A expenses declined by $1.8 million to $13.1 million compared to $14.9 million in the first quarter of 2007. This decline was primarily due to $1.2 million of lower contract labor and consultant costs and a $1.5 million decline in severance and stock-based compensation expense. This decrease was partially offset by $0.5 million of unfavorable foreign exchange translation effects, a $0.5 million increase in bad debt expense and $0.6 million of expenses that the company incurred in connection with the Audit Committee investigation mentioned above.
“Notwithstanding this $0.6 million of SG&A investigation expenses that retarded our pace of reducing SG&A expenses in the first quarter of 2008, I believe that our quarterly SG&A expenses have begun to resume a more normalized run rate,” commented Reichental. “Accordingly, I expect SG&A expenses for the full year 2008 to fall into the range of $44.0 to $52.0 million.”
Research and development expenses increased by 17% to $3.6 million in the first quarter of 2008 from $3.1 million in the first quarter of 2007. R&D costs in the first quarter of 2008 included costs associated with the launch of the V-Flash™ Desktop Modeler. “We are continuing to work on this as well as other selected new product developments,” continued Reichental, “and we expect to incur from $13.0 million to $14.0 million of research and development expenses for the full year 2008.”
The company’s unrestricted cash and cash equivalents declined by $7.8 million to $21.9 million at March 31, 2008 from $29.7 million at December 31, 2007. This decrease resulted primarily from $7.1 million of cash used in operating activities including the $5.3 million purchase of Tangible Express’ equipment and $2.1 million of cash used in investing activities, partially offset by $0.9 million of cash provided by financing activities and by a favorable $0.5 million effect of exchange rate changes on cash.
“I am pleased that, even during a challenging quarter, we were able to make progress in many areas as we continued to invest in new products and capabilities and to expand the geographic reach of our products in order to achieve our strategic objectives,” said Reichental. “Since the beginning of 2008, we:
“Despite the significant set backs that we suffered during the first quarter of this year, I remain confident in our overall direction and expect to regain lost ground in the coming quarters as a result of the positive traction that we are getting from our new products,” continued Reichental.
“In fact, I am gratified that during April, we were able to close several large-frame systems’ sales that were previously deferred. I expect that, notwithstanding the uncertain current economic climate and its associated uncertainties relating to capital spending patterns, we should be able to continue to benefit from our new products and initiatives.
“Apart from the high costs associated with
the launch of our V-Flash™ Desktop Modeler
and the abnormally high investigative and legal expenses we are
incurring in the short term, I expect that our quarterly operating
expenses are resuming a more normalized run rate.