3D Systems Reports Results for Second Quarter and First Half of 2008

ROCK HILL, S.C.--(Business Wire)--
3D Systems Corporation (NASDAQ: TDSC), a leading provider of 3-D
Modeling, Rapid Prototyping and Manufacturing solutions, announced
today its operating results for the second quarter and first half of
2008. The company also announced the filing of its Quarterly Report on
Form 10-Q for the second quarter of 2008 with the SEC today.

The company will hold a conference call and simultaneous webcast
to discuss its operating results for the second quarter and first half
of 2008 tomorrow morning, August 6, 2008 at 9:00 a.m., Eastern Time.
Additional information relating to that call and webcast is provided
below.

Operating highlights for the second quarter of 2008, compared to
the 2007 second quarter, were as follows:

-- Revenue increased by $0.2 million to $36.7 million, primarily
due to higher materials' sales and higher service revenue,
that were almost completely offset by a decline in systems'
sales.

-- Gross profit decreased by 1% to $13.3 million, as lower
margins on systems and services more than offset higher
materials' margins. This resulted in a 0.7 percentage point
gross profit margin decrease to 36.3%.

-- Continuing a trend, operating expenses declined by 12% to
$16.1 million.

-- Operating loss declined by 43% to $2.8 million while net loss
declined by 37% to $3.3 million.

-- Net loss per share declined by 44% to $0.15 per share.

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Operating Highlights
Second Quarter and First Six Months of 2008
($ in millions except for per share amounts)
----------------------------------------------------------------------

Second Quarter First Six Months
--------------------------------------------------
Operating %
Highlights 2008 2007 Change 2008 2007 % Change
------------------- --------------------------------------------------
Revenue $ 36.7 $ 36.4 0.6% $ 68.4 $ 73.4 (6.7%)
------------------- --------------------------------------------------
Gross profit $ 13.3 $ 13.5 $ 26.7 $ 29.4
% of Revenue 36% 37% (1.2%) 39% 40% (9.0%)
------------------- --------------------------------------------------
Operating expenses $ 16.1 $ 18.4 $ 32.8 $ 36.4
% of Revenue 44% 51% (12.3%) 48% 50% (9.9%)
------------------- --------------------------------------------------
Operating loss ($2.8) ($4.9) 42.8% ($6.0) ($7.0) 13.6%
------------------- --------------------------------------------------
Net loss ($3.3) ($5.3) 37.3% ($7.0) ($8.4) 16.7%
------------------- --------------------------------------------------
Diluted loss per
share ($0.15) ($0.27) 44.4% ($0.31) ($0.44) 29.5%
------------------- --------------------------------------------------
Unrestricted cash $ 19.1 $ 29.2 (34.5%)$ 19.1 $ 29.2 (34.5%)
------------------- --------------------------------------------------
Depreciation and
amortization $ 1.8 $ 1.8 $ 3.1 $ 3.6
% of Revenue 5% 5% (3.4%) 5% 5% (14.4%)
------------------- --------------------------------------------------
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Revenue

"Notwithstanding the improved sequential-quarter revenue growth
that we achieved from the first quarter to the second quarter of 2008
and higher materials' sales during the second quarter of 2008, our
second-quarter revenue fell some $4 million short of our mid-June
expectations primarily as a result of this year's continued uncertain
economic environment, and with that shortfall we missed several other
key targets. This resulted in overall disappointing results," said Abe
Reichental, President and Chief Executive Officer of 3D Systems.

"While, on the surface, we returned to modest top-line growth over
the 2007 quarter during a difficult economic period, the mix of our
revenue in the second quarter of 2008 was very different from that in
the second quarter of 2007, reflecting in part the positive
contributions from our integrated systems' materials strategy and
initial traction from our recently introduced 3-D Printers and the
negative impact of significantly higher used equipment sales," said
Reichental.

Revenue in the 2008 second quarter benefited from higher
materials' sales and the favorable effect of foreign currency
translation. However, this benefit was largely offset by lower unit
volume from sales of Large-Frame systems and a higher than normal
incidence of used equipment sales. These used equipment sales, with
lower margins than those the company generally recognizes on new
systems' sales, accounted for 20% of total systems' sales for the
quarter. Of the used equipment sales, 33% in units and 40% in revenue
involved the resale of systems that we acquired from Tangible Express
in the first quarter of 2008. The company also recorded $0.4 million
of additional deferred revenue in the second quarter of 2008 in
connection with several extended warranties and discounted service
related to certain systems, which the company expects to recognize
ratably over the contracted warranty and service periods.

The company benefited from higher unit volume from the sale of
Small-Frame systems and 3-D Printers during the second quarter, but
this increase in revenue was not enough to overcome the revenue
shortfall from Large-Frame systems and used equipment sales.

Revenue from 3-D Printers was helped by growing demand for the
company's Dental Professional Printers and grew to 26% of total
systems' sales. With the previously reported electrical noise problem
related to the company's V-Flash(R) Desktop modeler and the resulting
delays to its planned commercial shipments, the company neither made
any commercial shipments of its V-Flash(R) modeler during the second
quarter nor recognized any revenue from its V-Flash(R) Desktop
Modelers in the second quarter or first six months of 2008.

As a result of the factors discussed above, systems' revenue
decreased by 9% to $11.5 million from $12.7 million in the second
quarter of 2007. Large-Frame systems represented only 25% of total
systems' revenue for the quarter while sales of Small-Frame systems
and 3-D Printers increased as a portion of total systems' sales,
accounting for the remaining 75% of systems' revenue compared to 70%
of systems' revenue in the second quarter of 2007. As a general
matter, Small-Frame systems and 3-D Printers have lower gross profit
margins than Large-Frame systems.

Revenue from engineered materials and composites increased by 9%
to $16.2 million from $14.9 million for the second quarter of 2007,
primarily due to the growing contribution of recurring revenue from
the company's newer integrated systems. For the second quarter of
2008, integrated systems accounted for 26% of all materials' revenue,
reflecting a 4% sequential improvement over the materials' revenue for
the company's installed base of systems.

Consistent with the company's expectations, service revenue rose
slightly to $8.9 million in the second quarter 2008 compared to $8.8
million in the 2007 second quarter.

"The recovery that we experienced in systems' and materials'
revenue during the second quarter of 2008 was well below our
expectations and not enough to close the gap from the company's very
anemic first-quarter revenue," commented Reichental. "As a result,
revenue for the first six months of 2008 decreased by 7% to
$68.4 million from $73.4 million for the corresponding 2007 period.
This revenue decline reflected the effect of our first-quarter revenue
shortfall and included, for the six-month period, a 25% decrease in
systems' revenue that more than offset our 3% gain in revenue from
materials and a 4% increase in revenue from services," continued
Reichental.

At June 30, 2008, the company's backlog decreased to approximately
$1.1 million compared with the $3.1 million of backlog at December 31,
2007. The company believes that this lower level of backlog is
consistent with the normal operating trends in its business, which are
not generally dependent on backlog.

Gross Profit

Gross profit declined for both the second quarter and the first
six months of 2008.

Gross profit for the second quarter of 2008 decreased by 1% to
$13.3 million and, for the six months, decreased by 9% to
$26.7 million. Gross profit margin decreased by 70 basis points to
36.3% for the second quarter of 2008 from 37.0% in the 2007 period and
decreased to 39.1% for the first six months of 2008 from 40.0% in the
first six months of 2007.

The decline in gross profit margin in each 2008 period was
primarily due to the changes in revenue mix and lower volume of
Large-Frame systems' sales, which resulted in the company's inability
to fully absorb its overhead, and the high incidence of used-equipment
sales that resulted in reduced gross profit.

These higher sales of used equipment, combined with the items
mentioned below, negatively affected the company's gross profit margin
in the second quarter of 2008 by approximately 5 percentage points
after reflecting the offsetting favorable effect of foreign currency
translation on revenue with the unfavorable effect of foreign currency
translation on cost of goods sold for that quarter.

These other items included:

-- amounts associated with our initial planned build up of
V-Flash(R) finished goods inventory in anticipation of
commercial shipments of that new system once the company is
fully satisfied with it;

-- higher warranty costs;

-- duplicate supply-chain costs related to the company's efforts
to discontinue the outsourcing of its domestic logistics
activities and to relocate them to its Rock Hill facility,
which the company has targeted to complete this month; and

-- the unfavorable effect of foreign currency translation on cost
of goods sold, which on a net basis reduced the company's
gross profit margin by 60 basis points for the second quarter
and 40 basis points for the first six months of 2008.

Cost of sales increased by $0.4 million in the second quarter of
2008 and decreased by $2.3 million in the first six months of 2008, in
each case in relation to the respective 2007 periods. These changes
were generally in line with the company's changes in revenue in each
period.

"We have been subject to these foreign currency exchange effects
on gross profit as part or our normal business operations for a number
of years. However, as a result of persisting foreign currency
pressures, we have begun taking steps to mitigate the effect of this
exposure on our profit margins," continued Reichental. "These steps
include transferring production of certain of these materials that are
sold in U.S. dollars to the United States and more closely managing
the hedging of our currency exposure to items that we acquire or
produce in other currencies.

"We are disappointed that the items discussed above largely
negated our gross profit improvement initiatives during the second
quarter. While we expect to benefit from our previously disclosed
gross profit improvement initiatives starting in the fourth quarter of
this year, we also expect that as we continue our planned build-up of
V-Flash(R) inventory and subsequent shipments, this activity will
suppress our gross profit margins by $0.5 million to $1.0 million per
quarter for the near term," concluded Reichental.

Operating Expenses

Operating expenses continued their downward trend in the second
quarter of 2008, declining by 12% to $16.1 million from $18.4 million
in the second quarter of 2007. This decrease primarily reflected lower
selling, general and administrative expenses as research and
development expenses were essentially flat compared to the second
quarter of 2007, notwithstanding the company's expanded new product
development activities.

For the first six months of 2008, operating expenses declined by
10% compared to the 2007 period.

The decline in SG&A expenses for the second quarter and first six
months of 2008 arose primarily from lower contract labor and
consultant costs, lower severance and stock-based compensation expense
and lower audit expenses. These decreases were partially offset by
unfavorable foreign currency exchange effects and higher marketing
costs. The 2008 six-month period also included $0.6 million of
expenses that the company incurred in connection with the previously
disclosed Audit Committee investigation in the first quarter of 2008.
Legal expenses for the six-month period, while below their level for
the first six months of 2007, are expected to be higher than the
company's targeted legal expenses for the full year 2008 primarily as
a result of expenses associated with its previously disclosed pending
litigation.

"I am not at all satisfied with our slower than expected progress
on carrying out SG&A cost reductions, and as a result of the continued
uncertain economic environment, we have decided to undertake
additional cost reduction programs, including curtailment of certain
planned discretionary expenses for the balance of 2008 which are
intended to speed-up our progress. While I believe that our quarterly
SG&A expenses have begun to resume a more normalized run rate, we are
not yet achieving our stated targets," commented Reichental.
"Reflecting on our actual mid-year SG&A performance and factoring in
our planned marketing activities for the remainder of this year and
the uncertainty of our legal expenses arising from litigation for the
second half of this year, I expect SG&A expenses for the second half
of 2008 to fall in the range of $24 million to $26 million."

R&D expenses increased to $3.6 million in the second quarter of
2008 from $3.5 million in the second quarter of 2007. For the first
six months of 2008, R&D expenses increased by 8% to $7.2 million from
$6.6 million in the first six months of 2007. R&D costs in the first
six months of 2008 included costs associated with the V-Flash(R)
Desktop Modeler as well as other new product development activities.
"We are continuing the development of additional new products, and
accordingly we expect to incur from $7 million to $8 million of R&D
expenses in the second half of 2008," continued Reichental.

Operating Loss and Net Loss

The company's operating loss in the 2008 second quarter declined
by 43% to $2.8 million from $4.9 million in the 2007 quarter, and for
the first six months of 2008 declined by 14% to $6.0 million from $7.0
million in the 2007 period.

After giving effect to the relatively minor effect of other
expenses and taxes reflected on the company's consolidated statements
of operations, net loss for the second quarter of 2008 declined by 37%
to $3.3 million ($0.15 per share) from $5.3 million ($0.27 per share)
in the second quarter of 2007. Similarly, net loss for the first six
months of 2008 declined by 17% to $7.0 million ($0.31 per share) from
$8.4 million ($0.44 per share) in the 2007 period.

"Notwithstanding the modest improvement in operating results in
the second quarter, I am not pleased with the slower than expected
rate of progress we have been able to make during 2008 toward our goal
of achieving and improving our historical gross profit and operating
expense levels as a percent of revenue," commented Reichental.

"We believe, however, that our materials' strategy, which is at
the heart of our longer-term target business model and painful
business transformation that we have undergone, is beginning to gain
positive momentum and traction both in terms of its increased
contribution to total revenue and, more importantly, the growing
importance and traction of new materials' sales through our newer
integrated systems," continued Reichental.

"While we are not at all satisfied with our progress to date, we
remain confident in our current direction and expect to continue to
regain lost ground from earlier periods in the coming quarters,"
continued Reichental.

Cash and Working Capital

For the first six months of 2008, cash declined to $19.1 million
from $29.7 million at December 31, 2007. Approximately $7.8 million of
this decrease was attributable to the first quarter of 2008. The
remaining $2.8 million decrease in cash arose in the second quarter of
2008.

This $10.6 million decrease resulted primarily from $8.4 million
of cash used in operating activities and $3.5 million of cash used in
investing activities in the first six months of 2008. These uses of
cash were partially offset by cash derived from financing activities
and the effect of changes in foreign exchange rates.

This net use of cash included, in the first-quarter, the $5.3
million purchase of equipment from Tangible Express and, in the first
six months, materials' and systems' inventory purchases that we
undertook to support future growth. Specifically, the inventory
increase in the second quarter was driven by $3.7 million of purchases
of direct metals' systems, 3-D Printers, including V-Flash(R) systems,
and certain key components to support future production of 3-D
Printers. Excluding Tangible Express' equipment that the company sold
to customers or decided to retain for its own use, these inventory
investments aggregated $6.0 million for the first six months of 2008.
Except for the second-quarter inventory investments noted above,
inventory would have declined by approximately $2.0 million from March
31, 2008 to June 30, 2008.

Accounts receivable, net decreased to $28.5 million at June 30,
2008 compared to $31.1 million at the end of 2007. The changes are
reflective of the respective quarterly revenue level as well as an
increase in days' sales outstanding.

At June 30, 2008, inventories increased to $26.1 million compared
to $20.0 million at the end of 2007, reflecting primarily the
increases in finished goods inventory discussed above.

"In view of the short-term inventory investments in support of our
expanding 3-D Printing and Direct Metal systems' portfolio, we have
had to take a backward step against our previously stated inventory
reduction goals," continued Reichental. "Based on our current
go-to-market strategy, we still expect inventories to decline to
between $20 million to $22 million by the end of 2008.

"We continue to focus on improving our working capital management,
in order to pursue our near-term growth opportunities vigorously,"
concluded Reichental.

Conference Call and Audio Webcast Details

3D Systems will hold a conference call and audio webcast to
discuss its second-quarter and first-half 2008 financial results
tomorrow morning, August 6, 2008, at 9:00 a.m. Eastern Time.

-- To access the Conference Call, dial 1-888-336-3485 (or
706-634-0653 from outside the United States). A recording will
be available two hours after completion of the call for three
days. To access the recording, dial 1-800-642-1687 (or
706-645-9291 from outside the United States) and enter
55872360, the confirmation code.

-- To access the audio webcast, log onto 3D Systems' Web site at
www.3dsystems.com/ir. 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 beginning
approximately three hours after completion of the call at:
www.3dsystems.com/ir.

Forward-Looking Statements

Certain statements made in this release that are not statements of
historical or current facts are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may involve known and unknown risks,
uncertainties and other factors that may cause the actual results,
performance or achievements of the company to be materially different
from historical results or from any future results expressed or
implied by such forward-looking statements. In addition to statements
that explicitly describe such risks and uncertainties, readers are
urged to consider statements in the conditional or future tenses or
that include terms such as "believes," "belief," "expects,"
"estimates," "intends," "anticipates" or "plans" to be uncertain and
forward-looking. Forward-looking statements may include comments as to
the company's beliefs and expectations as to future events and trends
affecting its business and are necessarily subject to uncertainties,
many of which are outside the control of the company. The factors
described under the headings "Forward-Looking Statements," "Cautionary
Statements and Risk Factors," and "Risk Factors" 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
those reflected or predicted in forward-looking statements.

About 3D Systems Corporation

3D Systems is a leading provider of 3-D Modeling, Rapid
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:
Transform your products.

More information on the company is available at www.3dsystems.com,
or via email at moreinfo@3dsystems.com.

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3D SYSTEMS CORPORATION
Condensed Consolidated Statements of Operations
Quarter and Six Months Ended June 30, 2008 and 2007
(Unaudited)

Quarter Ended Six Months Ended
June 30, June 30,
----------------- -----------------
(in thousands, except per share
amounts) 2008 2007 2008 2007
-------- -------- -------- --------

Revenue:
Products $27,713 $27,591 $50,478 $56,150
Services 8,943 8,835 17,965 17,208
-------- -------- -------- --------
Total revenue 36,656 36,426 68,443 73,358

Cost of sales:
Products 15,795 15,864 27,522 29,928
Services 7,541 7,083 14,175 14,048
-------- -------- -------- --------
Total cost of sales 23,336 22,947 41,697 43,976

-------- -------- -------- --------

Gross profit 13,320 13,479 26,746 29,382

-------- -------- -------- --------

Operating expenses:
Selling, general and
administrative 12,555 14,872 25,619 29,764
Research and development 3,578 3,528 7,175 6,615

-------- -------- -------- --------
Total operating expenses 16,133 18,400 32,794 36,379

-------- -------- -------- --------

Operating loss (2,813) (4,921) (6,048) (6,997)

Interest expense and other, net 200 559 270 1,245
-------- -------- -------- --------

Loss before provision for income
taxes (3,013) (5,480) (6,318) (8,242)
Provision for (benefit of) income
taxes 310 (177) 696 181

-------- -------- -------- --------
Net loss $(3,323) $(5,303) $(7,014) $(8,423)

======== ======== ======== ========

Shares used to calculate basic and
diluted net loss 22,351 19,361 22,339 19,240

======== ======== ======== ========

Basic and diluted net loss per
share (1) $ (0.15) $ (0.27) $ (0.31) $ (0.44)
======== ======== ======== ========

(1) See Schedule 1 for the calculation of basic and diluted net loss
per share.
*T

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3D SYSTEMS CORPORATION
Condensed Consolidated Balance Sheets
June 30, 2008 and December 31, 2007
(Unaudited)

(in thousands) 2008 2007

--------- ---------

ASSETS
Current assets:
Cash and cash equivalents $ 19,109 $ 29,689
Accounts receivable, net 28,503 31,115
Inventories, net 26,085 20,041
Prepaid expenses and other current assets 3,648 4,429
Deferred income tax assets 586 693
Restricted cash 1,200 1,200
Assets held for sale, net 3,454 3,454
--------- ---------
Total current assets 82,585 90,621

Property and equipment, net 24,820 21,331
Goodwill 48,742 47,682
Other intangible assets, net 4,460 5,170
Other assets, net 2,755 2,581

--------- ---------
$163,362 $167,385
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Industrial development bonds related to assets
held for sale $ 3,205 $ 3,325
Current portion of capitalized lease obligations 188 181
Accounts payable 20,501 20,712
Accrued liabilities 10,178 12,248
Customer deposits 3,626 1,537
Deferred revenue 11,299 11,712

--------- ---------
Total current liabilities 48,997 49,715

Long-term portion of capitalized lease obligations 8,567 8,663
Other liabilities 4,524 4,238

--------- ---------
Total liabilities 62,088 62,616
--------- ---------

Stockholders' equity:
Common stock, authorized 60,000 shares, issued and
outstanding 22,417 shares (2008) and 22,224
shares (2007) 22 22
Additional paid-in capital 175,592 173,645
Treasury stock, at cost; 52 shares (2008) and 50
shares (2007) (113) (111)
Accumulated deficit in earnings (79,417) (72,403)
Accumulated other comprehensive income 5,190 3,616

--------- ---------
Total stockholders' equity 101,274 104,769
--------- ---------
$163,362 $167,385
========= =========
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3D SYSTEMS CORPORATION
Condensed Consolidated Statements of Cash Flow
Six Months Ended June 30, 2008 and 2007
(Unaudited)

Six Months Ended
June 30,
------------------
(in thousands) 2008 2007
--------- --------

Cash flow from operating activities:
Net loss $ (7,014) $(8,423)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities :
Provision for (benefit of) deferred income taxes 110 (149)
Depreciation and amortization 3,123 3,647
Provision for (benefit of) bad debts 287 (28)
Stock-based compensation 856 1,660
Changes in operating accounts:
Accounts receivable 4,353 8,591
Inventories (7,589) 181
Prepaid expenses and other current assets 899 1,587
Accounts payable (1,616) (9,571)
Accrued liabilities (2,749) (1,384)
Customer deposits 1,961 (4,993)
Deferred revenue (783) 965
Other operating assets and liabilities (219) 325

--------- --------
Net cash used in operating activities (8,381) (7,592)
--------- --------

Cash flow used in investing activities:
Purchases of property and equipment (3,244) (417)
Additions to license and patent costs (230) (262)
Software development costs - (300)

--------- --------
Net cash used in investing activities (3,474) (979)
--------- --------

Cash flow provided by financing activities:
Net proceeds from issuance of common stock - 20,562
Stock options and restricted stock proceeds 1,091 2,621
Repayment of long-term debt (210) (176)

--------- --------
Net cash provided by financing activities 881 23,007
--------- --------

Effect of exchange rate changes on cash 394 406

--------- --------
Net increase (decrease) in cash and cash equivalents (10,580) 14,842

Cash and cash equivalents at the beginning of the
period 29,689 14,331

--------- --------
Cash and cash equivalents at the end of the period $ 19,109 $29,173

========= ========
Supplemental Cash Flow Information:
Interest payments $ 483 $ 786
Income tax payments 408 791
Non-cash items:
Cumulative effect of adopting FIN 48 - 1,208
Conversion of 6% convertible subordinated
debentures - 509
Transfer of equipment from inventory to
property and equipment 3,944 945
Transfer of equipment to inventory from
property and equipment 1,518 322
*T

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Schedule 1
(Unaudited)

Following is a reconciliation of the numerator and denominator of the
basic and diluted net earnings (loss) per share computations:

Quarter Ended Six Months Ended
June 30, June 30,
----------------- -----------------
(in thousands, except per share
amounts) 2008 2007 2008 2007
-------- -------- -------- --------

Basic and diluted earnings (loss)
per share:
Basic earnings (loss) per share:
Numerator:
Net loss $(3,323) $(5,303) $(7,014) $(8,423)
======== ======== ======== ========

Denominator:
Weighted average common shares
outstanding 22,351 19,361 22,339 19,240
======== ======== ======== ========

Basic net loss per share $ (0.15) $ (0.27) $ (0.31) $ (0.44)
======== ======== ======== ========

Diluted earnings (loss) per share:
Numerator:
Net loss $(3,323) $(5,303) $(7,014) $(8,423)
======== ======== ======== ========

Denominator:
Weighted average common shares
outstanding 22,351 19,361 22,339 19,240
Effect of dilutive securities:
Stock options and restricted stock
awards - - - -

-------- -------- -------- --------
Diluted weighted average shares
outstanding 22,351 19,361 22,339 19,240
======== ======== ======== ========

Diluted net loss per share $ (0.15) $ (0.27) $ (0.31) $ (0.44)
======== ======== ======== ========
*T

3D Systems Corp.
Investor Contact
Chanda Hughes, 803-326-4010; HughesC@3dsystems.com
Media Contact:
Katharina Hayes, 803-326-3941; HayesK@3dsystems.com

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