VALENCIA, Calif., Mar. 1, 2005 - 3D Systems Corporation (Nasdaq: TDSC), a leading provider of rapid 3-D printing, prototyping and manufacturing solutions, announced today that its trend of improving financial results had continued in the fourth quarter and the full year of 2004.  The company reported:

• $38.3 million of revenue for the fourth quarter and $125.4 million of revenue for the full year, both of which are new records, representing 9% and 14% increases over the respective prior-year periods;
  
  
• $4.4 million of operating income for the fourth quarter and $5.6 million of operating income for the year, reversing losses in both prior-year periods; and
  
  
• $3.1 million of net income available to common stockholders for the fourth quarter and $1.0 million for the full year, resulting in fully diluted earnings available to common stockholders of $0.20 per share for the fourth quarter and $0.07 for the full year, reversing losses in the prior-year periods. 

“The momentum we have been building all year produced a sufficiently profitable fourth quarter to return us to profitability for the full year,” said Abe Reichental, 3D Systems’ president and chief executive officer.  “It was our strongest quarter ever.  We reversed our earlier cash outflows, adding $6.4 million of cash during the fourth quarter for a total increase of $2.3 million for the year.  Our balance sheet is stronger with the year-end conversion of $10 million of our 7% convertible subordinated debentures into common stock.  The strategic actions that we took during 2004 to reorganize, re-engineer and re-capitalize the business, resolve our expensive and disruptive legacy litigation and accelerate the execution of our strategic growth initiatives are gaining traction.” 

The company experienced strong revenue growth from its operations outside of the U.S., which rose 23% in the fourth quarter and 26% in the full year.  Revenue in the U.S. remained essentially flat in both periods as the company focused on restructuring and realigning its U.S. sales organization, which is now complete. Revenue from the company's growing global presence outside the U.S. accounted for 63% and 59% of total revenue for the fourth quarter and full year, respectively.  Revenue in the fourth quarter and full year included $7.4 million and $16.1 million, respectively, of sales of new products and services introduced since the latter part of 2003.  Without the favorable effect of foreign currency translation, revenue would have increased 4% for the fourth quarter of 2004 and 9% for the full-year period. 

Revenue increased in each class of product and service for the full year.  Revenue increases for the year were driven by unit-volume increases in each product and service class and in each geographic area.  Revenue increases in the fourth quarter had similar broad gains, except for U.S. sales of systems and related products.  Systems’ revenue in the fourth quarter increased 19% in Europe and 32% in Asia-Pacific, but U.S. systems’ revenue was hampered by substantial changes in the U.S. sales’ organization during the latter part of 2004. 

“During the fourth quarter, we completed the realignment and recruitment of our U.S. sales team and recruitment for several other key positions in finance, engineering and operations,” continued Reichental.  “As expected, these key changes came with short-term costs in order to meet medium-term and long-term goals.  Similarly, the decision we announced in July to outsource our systems’ assembly activities created unabsorbed manufacturing overhead, implementation costs and temporary working capital increases. But in spite of these costs, our favorable price/mix changes and continued cost-reduction efforts resulted in significant improvements in our gross profit margins.”

The increases in product margins, which arose from favorable price/mix changes and a favorable net impact of foreign currency translation, were partially offset by production ramp-up costs associated with the introduction of new products, under-absorbed direct manufacturing costs associated with the outsourcing of equipment assembly activities and costs of effecting customer conversions from other suppliers to materials supplied by the company.  Service margins continued to benefit globally from lower warranty costs and greater performance efficiencies. 

Operating expenses continued to decline – down $2.3 million in the fourth quarter and $7.6 million for the full year of 2004 while revenue increased in each of the 2004 periods.  Selling, general and administrative expenses declined primarily due to $2.7 million of lower legal and accounting costs related to legacy issues in the fourth quarter and a $6.0 million reduction in those costs for the full year.  SG&A cost reductions included lower bad debt expense and other operating cost reductions but were partially offset by $1.4 million of fees and expenses, predominantly incurred in the fourth quarter, in connection with the company’s internal control review pursuant to Section 404 of The Sarbanes-Oxley Act of 2002.

Strategic and tactical R&D expenditures increased by 47% to $2.7 million in the fourth quarter and by 16% to $10.5 million for the full year.  

While the Company increased its R&D expenditures, total operating costs declined to 35% of revenue in the fourth quarter compared to 44% of revenue in the previous year’s fourth quarter.  Operating expenses for the full year declined to 40% of revenue from 53% of revenue in 2003.

“Needless to say, we are extremely pleased with the significant improvement in our operating results,” said Reichental.  “While our revenue increased by $15 million in 2004, we were able to lower our combined working capital investment in trade accounts receivable, inventory and accounts payable by $0.4 million.  In fact, our days’ sales outstanding of 53 days and our days’ inventory on hand of 42 days were the lowest in years.”

“We are also gratified that our emphasis on process improvements and controls contributed to a favorable conclusion regarding the effectiveness of our financial reporting controls.  Pursuant to Sarbanes-Oxley requirements, we expect to receive our independent public accountant’s attestation of our financial reporting controls’ evaluation, reflecting the absence of any material weaknesses in those controls,” continued Reichental.

“Most importantly, the ability of our employees to act and operate like owners of the business is producing favorable trends in revenue, operating expenses, gross profit margin and cash flow. Reflecting on the significant progress we made throughout 2004, I believe that we are well positioned to transform the way our customers design, develop and manufacture their products and to improve our customer’s bottom line,” concluded Reichental.  

3D Systems will discuss its operating results for the fourth quarter of 2004 on a conference call and audio webcast to be held at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time) today.  Details are set forth below.

Fourth-quarter business highlights:

During the fourth quarter, 3D Systems:

• Introduced the Viper™ HA SLA^® system, a dual-vat stereolithography system for the production of hearing aid shells.
  
  
• Announced the availability of Accura^® si 45 SL material for the SLA^® 250 system with nylon 6:6-like properties.
  
  
• Succeeded in having all of its 7% convertible subordinated debentures converted into 833,312 shares of common stock.
  

Full-Year 2004 business highlights:

In 2004, 3D Systems:

• Introduced 17 new products.  Sales from new products led 2004 growth, and for the fourth quarter of 2004 new products represented 19.4% of total revenue.
  
  
• Outsourced all of its equipment assembly activities.  This initiative enabled the simultaneous pursuit of several key, large-scale strategic projects.
  
  
• Recruited and realigned key management positions in sales, marketing, operations, finance and engineering, resulting in a stronger, experienced and energized team.
  
  
• Settled all the distracting and expensive legacy lawsuits on favorable terms.
  
  
• Initiated several corporate governance changes, including termination of its stockholder rights’ plan, elimination of the staggered board, restatement of the Code of Conduct, adoption of Corporate Governance Guidelines and adoption of a Code of Ethics for Senior Financial Executives and Directors.
  
  
• Created key strategic alliances with several key industry players.
  
  
• Strengthened financial controls across all functions and geographies, and reinforced an improved control culture.
  
  
• Secured a $15 million revolving credit facility.

 3D Systems’ complete suite of customer solutions includes

• 3-D Printing systems, which accept digital input from a three-dimensional CAD station, convert the digital file one horizontal slice at a time, and jet hot-melted plastic material in an additive layer-by-layer build-up to create a solid part.  3-D Printers enable designers, engineers, architects and marketers to communicate their concepts frequently, and substantially reduce the time it takes to bring new products to market.
  
  
• Stereolithography or SLA^® systems convert proprietary materials and composites into solid cross-sections, layer by layer, until the desired parts are built. SLA^® systems are capable of making multiple parts of different geometries and shapes at the same time and are designed to produce prototypes, patterns or end-use parts that have a wide range of sizes and shapes.
  
  
• Selective Laser Sintering or SLS^® systems use heat to melt and fuse, or sinter, powdered materials into solid cross-sections, layer by layer, until the desired parts are complete.  SLS^® systems can create parts from a variety of plastic and metal materials and composites and are capable of processing multiple parts within the same build cycle.
  
  
• Engineered materials and composites that the company blends and markets under a variety of brand names for use in all of the company’s systems to produce high-quality models, prototypes and parts.  Stereolithography materials are marketed under the Accura^® brand, selective laser sintering materials under the DuraForm^®, LaserForm™ and CastForm™ brands, and 3-D printing materials under the VisiJet^® brand. The company also distributes additional materials and composites that are manufactured by DSM Somos^® and Dreve in order to enhance the portfolio of solutions available from the company.
  
  
• Software for proprietary part preparation for use on personal computers and engineering workstations.  These proprietary software packages generate the information required by the company’s SLS^®, SLA^® and 3-D printing systems to create three-dimensional models and parts.
  
  
• Services that the company provides include a suite of comprehensive customer services and local field support that are provided on a worldwide basis for all of the company’s 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 legacy systems.
  

Broad Applications and End-Uses:

• 3-D Printing system solutions are used for concept-modeling and three-dimensional printing applications. 3-D printed parts are used primarily for visualizing and communicating mechanical design applications.  They are also used for other applications including supply-chain management, architecture, art, surgical modeling, marketing and entertainment.
  
  
• Rapid prototyping system solutions are used for rapid prototyping applications, including the generation of product concept models, functional prototypes and master-casting and tooling patterns that are often used as an efficient, cost-effective means of evaluating product designs.
  
  
• Rapid manufacturing system solutions are used for rapid manufacturing applications to manufacture end-use parts, jigs, fixtures, tools and patterns directly from a digital image.  The company’s rapid manufacturing customers produce end-use parts without the need for expensive tooling or molds and without lengthy set-ups, resulting in significant savings, flexibility and mass customization capabilities.

Conference Call and Audio Webcast Details

3D Systems will hold a conference call and audio webcast to discuss its fourth-quarter and full-year 2004 financial results today at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time).

• To access the Conference Call, dial 877/791-4796 (or 706/679-6014 from outside the United States). A recording will be available two hours after completion of the call for seven days.  To access the recording, dial 800/642-1687 (or 706/645-9291 from outside the United States) and enter 4123088, the conference call ID number.
  
  
• To access the audio webcast, log onto 3D Systems’ website at www.3dsystems.com.   The link to the webcast is provided on the home page of the website.   To ensure timely participation and technical capability, we recommend logging on a few minutes prior to the conference call to activate your participation.  The webcast will be available for replay at: http://www.3dsystems.com/company/investor/index.asp

Forward-Looking Statements

Certain statements made in this release are forward-looking statements. These statements include comments as to the company’s beliefs and expectations as to future events and trends affecting its business.  These forward-looking statements are based upon management’s current expectations concerning future events and trends and are necessarily subject to uncertainties, many of which are outside the control of the company. The factors stated under the heading “Forward-Looking Statements” and “Cautionary Statements and Risk Factors” in management’s discussion and analysis of results of operations and financial condition, which appear in the company’s periodic filings with the Securities and Exchange Commission, as well as other factors, could cause actual results to differ materially from such statements.

About 3D Systems Corporation

Founded in 1986, 3D Systems is a leading provider of rapid 3-D printing, prototyping and manufacturing solutions.  Its systems and materials reduce the time and cost of designing products and facilitate direct and indirect manufacturing by creating actual parts directly from digital input.  These solutions are used for design communication and prototyping as well as for production of functional end-use parts:  Transforming the way people design, develop and manufacture products.

More information on the company is available at www.3dsystems.com, or by phoning 888/337-9786, ext. 2882 (or 661/295-5600, ext. 2882 from outside the United States), or via email at moreinfo@3dsystems.com. 

Note to editors:  3D Systems, SLA, SLS, DuraForm, ThermoJet, VisiJet and Accura are registered trademarks and SLS, InVision, Viper, LaserForm and CastForm are trademarks of 3D Systems.  All other product names or services mentioned are trademarks or registered trademarks of their respective companies.