Our operating loss for the first quarter of 2009 decreased to $1.6 million from $4.0 million in the 2008 quarter. This decrease in operating loss arose from a reduction in operating expenses in 2009, partially offset by lower revenue and gross profit as discussed below.
First quarter comparison of revenue by class of product and service Table 1 sets forth our change in revenue by class of product and service for the first quarter of 2009 compared to the first quarter of 2008:

Table 1

                                     Systems and
                                        Other
(Dollars in thousands)                Products                   Materials                 Services                   Totals
Revenue at March 31, 2008       $  7,842         24.7 %    $ 14,923         46.9 %    $ 9,022        28.4 %    $ 31,787          100 %

Change in revenue:
Volume
Core products and services        (1,962 )      (25.0 )      (1,942 )      (13.0 )        623         6.9        (3,281 )      (10.3 )
New products and services           (507 )       (6.5 )      (1,999 )      (13.4 )       (471 )      (5.2 )      (2,977 )       (9.4 )
Price/Mix                           (152 )       (1.9 )         486          3.3            -           -           334          1.1
Foreign currency translation        (362 )       (4.6 )        (838 )       (5.6 )       (632 )      (7.0 )      (1,832 )       (5.8 )

Net change                        (2,983 )      (38.0 )      (4,293 )      (28.7 )       (480 )      (5.3 )      (7,756 )      (24.4 )

Revenue at March 31, 2009       $  4,859         20.2 %    $ 10,630         44.2 %    $ 8,542        35.6 %    $ 24,031        100.0 %

On a consolidated basis, revenue for the first quarter of 2009 declined by 24.4% to $24.0 million from $31.8 million for the first quarter of 2008. The principal factors leading to this $7.8 million decrease in consolidated revenue were the $6.3 million decrease in product unit volume and the $1.8 million unfavorable effect of foreign currency translation partially offset by the $0.3 million combined favorable effect of price and mix.
In the absence of significant large-frame systems sales, revenue from systems and other products decreased by $3.0 million or 38% to $4.9 million for the quarter ended March 31, 2009 from $7.8 million for the first quarter of 2008. Systems revenue fell to 20.2% of consolidated revenue in the 2009 quarter from 24.7% in the 2008 period. The decrease from 2008 arose primarily from a $2.5 million net decrease in unit volume of core and new products, a $0.4 million unfavorable impact from foreign currency translation and a $0.1 million combined unfavorable effect of price and mix. The decrease in volume from systems sales was due to lower sales of large-frame systems that were only partially offset by an increase in unit volume of 3-D printers. Large-frame systems represented 9% of total systems revenue for the first quarter of 2009 compared to 57% for the first quarter of 2008, while sales of small-frame systems and 3-D printers accounted for the remaining 91%, increasing from 43% for the first quarter of 2008. Revenue from 3-D printers was helped by increased sales of our ProJet™ line of 3-D printers introduced in 2008, which were up 57%, and by growing demand for our Dental Professional printers. Systems orders and sales tend to fluctuate on a quarterly basis as a result of a number of factors, including the types of systems ordered by customers, customer acceptance of newly introduced products, the timing of product orders and shipments, global economic conditions and fluctuations in foreign currency exchange rates. Our customers generally purchase our systems as capital equipment items, and their purchasing decisions may have a long lead time. Due to the relatively high list price of certain systems and the overall low unit volume of systems sales in any particular period, the acceleration or delay of orders and shipments of a small number of systems from one period to another can significantly affect revenue reported for our systems sales for the period involved. Revenue reported for systems sales in any particular period is also affected by revenue recognition rules prescribed by generally accepted accounting principles. However, as noted above, production and delivery of our systems is generally not characterized by long lead times, and backlog is therefore generally not a material factor in our business.
At March 31, 2009 our backlog was approximately $0.9 million, a 35.7% reduction from the $1.4 million of backlog at December 31, 2008. We believe that our level of backlog at March 31, 2009 is generally consistent with the normal operating trends in our business.
As used in this Management's Discussion and Analysis, the combined effect of changes in product mix and average selling prices, sometimes referred to as price and mix effects, relates to changes in revenue that are not able to be specifically related to changes in unit volume. Among these changes are changes in the product mix of our materials and our systems as the trend toward smaller, more economical systems has continued and the influence of new systems and materials on our operating results has grown. Our reporting systems are not currently configured to produce more quantitative information regarding the effect of price and mix changes on revenue.

Revenue from materials was also adversely impacted by the absence of large-frame systems sales, which are typically accompanied by significant initial materials purchases to charge up new systems and commence production, and decreased demand in the global marketplace due to the continued overall economic downturn. Revenue from materials declined by $4.3 million or 28.7% to $10.6 million for the first quarter of 2009 from $14.9 million for the 2008 quarter and represented 44.2% of consolidated revenue in the 2009 period compared to 46.9% in the 2008 period. This decrease was primarily the result of the $3.9 million decrease in core and new product volume, the $0.8 million unfavorable effect of foreign currency translation, partially offset by the $0.5 million favorable combined effect of price and mix. Sales of integrated materials represented 35% of total materials revenue in the first quarter of 2009 compared to 22% in the first quarter of 2008 and 28% in the fourth quarter of 2008, evidencing that our integrated materials strategy continues to build momentum. Sales of integrated materials in the first quarter of 2009 increased by 17% compared to an overall decline of 28.7% for all material sales. The decline in materials revenue as a percentage of total revenue was primarily due to the proportionately lower decline in service revenue in the 2009 quarter.
Revenue from services decreased by $0.5 million or 5.3% to $8.5 million for the first quarter of 2009 from $9.0 million for the 2008 period and increased to 35.6% of consolidated revenue from 28.4% for the 2008 period. The decrease was primarily the result of unfavorable foreign currency translation of $0.6 million and a decrease in new products and services volume of $0.5 million, partially offset by an increase in core products volume of $0.6 million, primarily driven by the renewal of service contracts on legacy systems. Change in first quarter revenue by geographic region Each geographic region contributed to our lower level of revenue in first quarter of 2009. Table 2 sets forth the change in revenue by geographic area for the first quarter of 2009 compared to the first quarter of 2008:

Table 2

(Dollars in thousands)            U.S.                      Europe                  Asia-Pacific                  Totals
Revenue at March 31,
2008                      $ 12,037         37.9 %    $ 15,661         49.3 %    $  4,089         12.9 %    $ 31,787          100 %

Change in revenue:
Volume                        (941 )       (7.8 )      (3,902 )      (24.9 )      (1,415 )      (34.6 )      (6,258 )      (19.7 )
Price/Mix                     (341 )       (2.8 )         293          1.9           382          9.3           334          1.1
Foreign currency
translation                      -            -        (2,054 )      (13.1 )         222          5.5        (1,832 )       (5.8 )

Net change                  (1,282 )      (10.6 )      (5,663 )      (36.1 )        (811 )      (19.8 )    $ (7,756 )      (24.4 )

Revenue at March 31,
2009                      $ 10,755         44.8 %    $  9,998         41.6 %    $  3,278         13.6 %    $ 24,031          100 %

Revenue from U.S. operations declined by $1.2 million or 10.6 % to $10.8 million in 2009 from $12.0 million in the first quarter of 2008. The decrease was due to lower volume and the unfavorable combined effect of price and mix. Revenue from non-U.S. operations at March 31, 2009 declined by $6.4 million or 32.8% to $13.3 million from $19.7 million at March 31, 2008. Revenue from non-U.S. operations as a percent of total revenue was 55.2% and 62.1%, respectively, at March 31, 2009 and 2008. The decline in non-U.S. revenue, excluding the effect of foreign currency translation, was 23.5% in the first quarter of 2009.
Revenue from European operations declined by $5.7 million or 36.1% to $10.0 million from $15.7 million in the prior year period. This decrease was due to a $3.9 million decline in volume and the $2.1 million unfavorable impact of foreign currency translation, partially offset by a $0.3 million favorable combined effect of price and mix.
Revenue from Asia-Pacific operations declined by $0.8 million or 19.8% to $3.3 million from $4.1 million in the prior year period due primarily to the unfavorable $1.4 million decrease in volume as sales were adversely affected by the previously disclosed reorganization filing of our largest Japanese customer. This decline in sales volume was partially offset by a $0.4 million favorable combined effect of price and mix and $0.2 million in favorable foreign currency translation.

Gross profit and gross profit margins
Table 3 sets forth gross profit and gross profit margin for our products and services for the first quarters of 2009 and 2008:

Table 3

                                             Three Months Ended March 31,
                                            2009                       2008
                                    Gross           %          Gross           %
          (Dollars in thousands)    Profit       Revenue       Profit       Revenue
          Systems                  $    853          17.5 %   $     10           0.1 %
          Materials                   6,699          63.0       10,302          69.0
          Services                    2,927          34.3        2,388          26.5

          Total                    $ 10,479          43.6 %   $ 12,700          39.9 %

We reclassified $0.7 million of foreign exchange gains, that had previously been included in product cost of sales for the first quarter of 2008, to interest and other expense (income), net in our condensed consolidated statement of operations. This had the effect of reducing our previously reported gross profit and interest and other expense (income), net for the first quarter of 2008 by $0.7 million and of increasing operating loss for that quarter by the same amount. It did not affect any of the other line items on our condensed consolidated statement of operations for 2008, and this management discussion and analysis reflects the results of this reclassification.
On a consolidated basis, gross profit for the first quarter of 2009 decreased by $2.2 million to $10.5 million from $12.7 million in the first quarter of 2008, primarily as a result of lower materials sales and lower large-frame systems revenue.
Consolidated gross profit margin in the first quarter of 2009 increased by 3.7 percentage points to 43.6% of revenue from 39.9% of revenue for the 2008 quarter. Countering the adverse effect of our lower revenue, the increase in gross profit margin reflected the effect of various cost savings initiatives that we pursued in 2008 and the first quarter of 2009, which included certain supply chain efficiencies, the movement of certain third-party logistics activities in-house, the sale of system upgrades and a reduction in field service costs. We believe these initiatives will improve gross profit margin by $1 million per quarter on a sustainable basis, which we expect will be fully realized after the first quarter of 2009.
Systems gross profit for the first quarter of 2009 increased to $0.9 million from a nominal amount for the 2008 quarter, and gross profit margin for systems increased by 17.4 percentage points to 17.5% of revenue from 0.1% of revenue in the 2008 quarter primarily due to increased supply chain efficiencies and lower system refurbishment costs, partially offset by the decline in volume discussed above resulting in the absorption of fixed costs over fewer units. Materials gross profit for the first quarter of 2009 decreased by $3.6 million or 35.0% to $6.7 million from $10.3 million for the 2008 quarter, and gross profit margin for materials decreased by 6.0 percentage points to 63.0% of revenue from 69.0% of revenue in the 2008 quarter primarily due to the decline in sales volume of materials, which was adversely affected by the lower level of large-frame systems sales.
Gross profit for services for the first quarter of 2009 increased by $0.5 million or 22.6% to $2.9 million from $2.4 million for the 2008 quarter, and gross profit margin for services increased by 7.8 percentage points to 34.3% of revenue from 26.5% of revenue in the 2008 quarter. The improved gross profit was due to the combined effect of a decline in fixed costs associated with our decision to cease servicing certain legacy products, resolution of the premature failure of certain system components and reductions in field service costs initiated in 2008.

Operating expenses
As shown in Table 4, total operating expenses decreased by $4.6 million or 27.5% to $12.1 million in the first quarter of 2009 from $16.7 million in the first quarter of 2008 as our cost savings initiatives have gained traction, as evidenced by continued declines in operating expenses in each of the last six quarters. This decrease was primarily due to $3.9 million in lower selling, general and administrative expenses and $0.7 million of lower research and development expenses, both of which are discussed below.

Table 4

                                                     Three Months Ended March 31,
                                                 2009                           2008
                                                          %                              %
(Dollars in thousands)                  Amount         Revenue         Amount         Revenue
Selling, general and administrative
expenses                               $   9,188            38.2 %    $  13,064            41.1 %
Research and development expenses          2,898            12.1          3,597            11.3

Total operating expenses               $  12,086            50.3 %    $  16,661            52.4 %

Selling, general and administrative expenses Selling, general and administrative expenses declined by $3.9 million to $9.2 million in the first quarter of 2009 compared to $13.1 million in the first quarter of 2008 primarily related to a:
• $1.3 million decline in compensation costs primarily due to lower staffing levels;

• $0.6 million of lower expenses compared to the first quarter 2008 associated with the Audit Committee investigation of anonymous claims of wrongdoing by certain members of management, which claims were found to be baseless;

• $0.5 million of lower accounting fees;

• $0.4 million of lower contract labor and consultant costs;

• $0.3 million of lower travel expenses;

• $0.3 million of lower occupancy costs;

• $0.2 million of lower commissions to outside agents; and

• $0.1 million of lower advertising expenses.

These reductions were partially offset by $0.3 million of higher bad debt expense.
Research and development expenses
Research and development expenses decreased by $0.7 million or 19.4% to $2.9 million in the first quarter of 2009 from $3.6 million in the first quarter of 2008, principally due to a $0.5 million decrease in outside consulting services in the 2009 quarter and the reduction in costs for 2009 following the commercialization of certain of our new products previously announced in 2008. Loss from operations
Our loss from operations for the first quarter of 2009 decreased by $2.4 million to $1.6 million from $4.0 million in 2008 including the effect of the first quarter 2008 reclassification discussed above. See "Gross profit and gross profit margins" above.
Our reduced loss from operations in the first quarter of 2009 reflected our higher gross profit margin and our lower operating expenses, which partially offset the effect of our lower consolidated revenue.
The following table sets forth operating loss by geographic area for the first quarter of 2009 compared to 2008:

Table 5

                                             Three Months Ended March 31,
         (Dollars in thousands)                2009                 2008
         Income (loss) from operations:
         United States                    $       (2,944 )     $       (4,456 )
         Germany                                     108                  199
         Other Europe                                419                  448
         Asia Pacific                                943                  327

         Subtotal                                 (1,474 )             (3,482 )
         Inter-segment elimination                  (133 )               (479 )

         Total                            $       (1,607 )     $       (3,961 )

With respect to the U.S., in 2009 and 2008, the changes in operating loss by geographic area reflected the same factors relating to our consolidated operating loss that are discussed above. As most of our operations outside the U.S. are conducted through sales and marketing subsidiaries, the changes in operating income (loss) in our operations outside the U.S. in each of 2009 and 2008 resulted primarily from changes in transfer pricing.
Operating income from our Asia-Pacific operations includes an additional $0.5 million bad debt provision related to 2009 sales to our largest Japanese customer, who filed for court protection in February 2009. Receivables prior to the filing have been fully reserved, while sales subsequent to the filing have been on a cash basis.
Interest and other expense (income), net Interest and other expense (income), net amounted to $0.2 million of net expense in the first quarter of 2009 compared with $0.7 million of income, net in the 2008 quarter, after giving effect to the reclassification discussed above. See "Gross profit and gross profit margins" above.
The $0.2 million of net expense in the first quarter of 2009 reflected other income of $0.1 million and an insignificant amount of interest income in the first quarter of 2009 that was more than fully offset by $0.2 million of interest expense and $0.1 million of foreign exchange losses. The reduction in interest expense from 2008 resulted from the repayment of the outstanding industrial development bonds in January 2009, while the lower interest income was the result of our having moved our short-term investments into U.S. Treasury funds.
We recognized $0.7 million of interest and other income, net in the first quarter of 2008 reflecting a $0.7 million foreign exchange gain (after giving effect to the reclassification discussed above. See "Gross profit and gross profit margins" above), and $0.2 million of interest income, partially offset by $0.2 million of interest expense.
Provision for income taxes
We recorded a $0.3 million provision for income taxes in the first quarter of 2009 and $0.4 million in 2008. Our provision for income taxes in both periods primarily reflects tax expense associated with income taxes in foreign jurisdictions.
Net loss
Our net loss for the first quarter of 2009 improved to $2.1 million compared to a $3.7 million net loss in the first quarter of 2008. The principal reasons for our lower net loss, which were discussed in more detail above, were:
• the $2.4 million reduction in our operating loss; partially offset by

• the $0.9 million increase in interest and other expense (income), net.

For the three months ended March 31, 2009, our weighted average common shares outstanding was 22.4 million, and on a per share basis the basic and diluted loss per share was $0.09. For the three months ended March 31, 2008, our weighted average common shares outstanding was 22.3 million, and on a per share basis the basic and diluted net loss per share was $0.17. Financial Condition and Liquidity
We generated $1.3 million of net cash in the first quarter of 2009 and finished the quarter with $23.4 million of unrestricted cash compared to $22.2 million of unrestricted cash at December 31, 2008. This $1.3 million increase in net cash included $1.7 million of cash provided by operating activities, consisting of $1.2 million of cash provided by net changes in operating accounts and $2.6 million of non-cash charges that were included in our net loss, partially offset by our $2.1 million net loss. We also used $0.3 million of cash in investing activities, and generated $0.1 million of cash from financing activities in 2009. See "Working capital," "Cash flow" and "Outstanding debt and capitalized lease obligations" below.
During 2009, we intend to continue to rely upon our unrestricted cash and cash flow from operations to meet our liquidity needs. While we believe that the actions taken in 2008 and 2009 to reduce our operating costs, improve our gross profit margin and manage working capital should benefit us in 2009, there can be no assurance in these uncertain economic times that these actions will be sufficient.

Following the redemption of our remaining outstanding industrial development bonds in January 2009, our principal contractual commitments consist of the capital leases on our Rock Hill facility, which are discussed in greater detail below.
Working capital
Our net working capital decreased by $1.5 million to $33.8 million at March 31, 2009 from $35.3 million at December 31, 2008. Table 6 provides a summary of the net changes in working capital items between these two dates.

Table 6

                                                              Increase
         (Dollars in thousands)                              (Decrease)
         Working capital at December 31, 2008               $     35,279
         Changes in current assets:
         Cash and cash equivalents                                 1,253
         Accounts receivable, net of allowances                   (8,457 )
. . .