| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2017
2018
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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333 THREE D SYSTEMS CIRCLE ROCK HILL, SOUTH CAROLINA | 29730 | ||
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Emerging growth company |
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(in thousands, except par value) March 31, December 31, ASSETS Current assets: Cash and cash equivalents $ $ Accounts receivable, net of reserves — $11,424 (2017) and $12,920 (2016) Inventories, net of reserves — $12,206 (2017) and $14,770 (2016) Prepaid expenses and other current assets Total current assets Property and equipment, net Intangible assets, net Goodwill Long term deferred income tax asset Other assets, net Total assets $ $ LIABILITIES AND EQUITY Current liabilities: Current portion of capitalized lease obligations $ $ Accounts payable Accrued and other liabilities Customer deposits Deferred revenue Total current liabilities Long term portion of capitalized lease obligations Long term deferred income tax liability Other liabilities Total liabilities Redeemable noncontrolling interests Commitments and contingencies (Note 14) Stockholders’ equity: Common stock, $0.001 par value, authorized 220,000 shares; issued 115,419 (2017) and 115,113 (2016) Additional paid-in capital Treasury stock, at cost — 1,631 shares (2017) and 1,498 shares (2016) Accumulated deficit Accumulated other comprehensive loss Total 3D Systems Corporation stockholders' equity Noncontrolling interests Total stockholders’ equity Total liabilities, redeemable noncontrolling interests and stockholders’ equity $ $ Quarter Ended March 31, (in thousands, except per share amounts) 2017 2016 Revenue: Products $ $ Services Total revenue Cost of sales: Products Services Total cost of sales Gross profit Operating expenses: Selling, general and administrative Research and development Total operating expenses Loss from operations Interest and other income, net Loss before income taxes Provision for income taxes Net loss Less: net income (loss) attributable to noncontrolling interests Net loss attributable to 3D Systems Corporation $ $ Net loss per share available to common stockholders — basic and diluted $ $ Other comprehensive income (loss): Pension adjustments, net of taxes $ $ Foreign currency translation gain Total other comprehensive income Less foreign currency translation gain attributable to noncontrolling interests Other comprehensive income attributable to 3D Systems Corporation Comprehensive loss Less comprehensive income attributable to noncontrolling interests Comprehensive loss attributable to 3D Systems Corporation $ $ Quarter Ended March 31, (In thousands) 2017 2016 Cash flows from operating activities: Net loss $ $ Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization Stock-based compensation Provision for bad debts Benefit of deferred income taxes Changes in operating accounts, net of acquisitions: Accounts receivable Inventories Prepaid expenses and other current assets Accounts payable Accrued and other current liabilities Deferred revenue All other operating activities Net cash provided by operating activities Cash flows from investing activities: Cash paid for acquisitions, net of cash assumed — Purchases of property and equipment Additions to license and patent costs Proceeds from disposition of property and equipment — Net cash used in investing activities Cash flows from financing activities: Payments on earnout consideration — Repurchase of stock, net, and employer paid tax on employee awards Repayment of capital lease obligations Net cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period $ $ Cash interest payments $ $ Cash income tax payments, net $ $ Transfer of equipment from inventory to property and equipment, net (a) $ $ Transfer of equipment to inventory from property and equipment, net (b) $ $ Stock issued for acquisitions $ $ — In general, an asset is transferred from property and equipment, net, into inventory at its net book value when the Company has identified a potential sale for a used machine. 3D SYSTEMS CORPORATION Common Stock Treasury Stock (In thousands, except par value) Shares Par Value $0.001 Additional Paid In Capital Shares Amount Accumulated Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Total 3D Systems Corporation Stockholders' Equity Equity Attributable to Noncontrolling Interests Total Stockholders' Equity Balance at December 31, 2016 $ $ $ $ $ $ $ $ Issuance (repurchase) of stock — — — — — Issuance of stock for acquisitions — — — — — — Cumulative impact of change in accounting policy — — — — — — — — Stock-based compensation expense — — — — — — — Net income (loss) — — — — — — Pension adjustment — — — — — — — Foreign currency translation adjustment — — — — — — Balance at March 31, 2017 $ $ $ $ $ $ $ $ NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Standards (in thousands) 2017 2016 Raw materials $ $ Work in process Finished goods and parts Inventories, net $ $ (in thousands) 2017 2016 Useful Life (in years) Land $ $ N/A Building 25-30 Machinery and equipment 2-7 Capitalized software 3-5 Office furniture and equipment 1-5 Leasehold improvements Life of lease (a) Rental equipment 5 Construction in progress N/A Total property and equipment Less: Accumulated depreciation and amortization Total property and equipment, net $ $ 2017 2016 (in thousands) Gross Accumulated Amortization Net Gross Accumulated Amortization Net Useful Life (in years) Weighted Average Useful Life Remaining (in years) Intangible assets with finite lives: Patent costs $ $ $ $ $ $ 1-20 9 Acquired technology 1-16 4 Acquired patents 1-6 4 Customer relationships 1-14 6 Trade secrets 7 4 Trade names 1-8 5 Other 2-4 2 Total intangible assets $ $ $ $ $ $ 1-20 4 (in thousands) 2017 2016 Compensation and benefits $ $ Vendor accruals Accrued professional fees Accrued taxes Royalties payable Accrued interest Accrued earnouts related to acquisitions Accrued other Total $ $ (in thousands) 2017 2016 Arbitration award $ $ Long term employee indemnity Defined benefit pension obligation Long term tax liability Long term earnouts related to acquisitions Long term deferred revenue Other long term liabilities Total $ $ 2018. Quarter Ended March 31, (in thousands) 2017 2016 Service cost $ $ Interest cost Amortization of actuarial loss Total periodic cost $ $ Quarter Ended March 31, (in thousands, except per share amounts) 2017 2016 Numerator: Net loss attributable to 3D Systems Corporation $ $ Denominator for basic and diluted net loss per share: Weighted average shares Net loss per share — basic and diluted $ $ Level 2- Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or Fair Value Measurements as of March 31, 2017 (in thousands) Level 1 Level 2 Level 3 Total Description Cash equivalents (a) $ $ — $ — $ Earnout consideration (b) $ — $ — $ $ Fair Value Measurements as of December 31, 2016 (in thousands) Level 1 Level 2 Level 3 Total Description Cash equivalents (a) $ $ — $ — $ Earnout consideration (b) $ — $ — $ $ Cash equivalents include funds held in money market instruments and are reported at their current carrying value, which approximates fair value due to the short-term nature of these instruments and are included in cash and cash equivalents in the consolidated balance sheet. The fair value of the earnout consideration, which is based on the present value of the expected future payments to be made to the sellers of the acquired businesses, was derived by analyzing the future performance of the acquired businesses using the earnout formula and performance targets specified in each purchase agreement and adjusting those amounts to reflect the ability of the acquired entities to achieve the stated targets. Given the significance of the unobservable inputs, the valuations are classified in Level 3 of the fair value hierarchy. The change in earnout consideration reflects a 2018. The difference between the statutory rate and the effective tax rate is driven from the impact of the change in valuation allowances that the Company has recorded in the US and other foreign jurisdictions for both quarters ended March 31, 2018 and 2017. Quarter Ended March 31, (in thousands) 2017 2016 Revenue from unaffiliated customers: Americas $ $ Germany Other EMEA Asia Pacific Total revenue $ $ Quarter Ended March 31, (in thousands) 2017 2016 Revenue by class of product and service: Products $ $ Materials Services Total revenue $ $ Quarter Ended March 31, 2017 Intercompany Sales to (in thousands) Americas Germany Other EMEA Asia Pacific Total Americas $ $ $ $ $ Germany — Other EMEA Asia Pacific — Total $ $ $ $ $ Quarter Ended March 31, 2016 Intercompany Sales to (in thousands) Americas Germany Other EMEA Asia Pacific Total Americas $ $ $ $ $ Germany — — Other EMEA Asia Pacific — Total $ $ $ $ $ Quarter Ended March 31, (in thousands) 2017 2016 Income (loss) from operations: Americas $ $ Germany Other EMEA Asia Pacific Subtotal Intercompany elimination Total $ $ (in thousands) March 31, 2017 December 31, 2016 Assets: Americas $ $ Germany Other EMEA Asia Pacific Total $ $ (in thousands) March 31, 2017 December 31, 2016 Cash and cash equivalents: Americas $ $ Germany Other EMEA Asia Pacific Total $ $ 5. On September 28, 2017, the Court granted Lead Plaintiff’s Motion for Class Certification. On February 14, 2018, following mediation, the parties entered into a Stipulation of Settlement that provides for, among other things, payment of $50 million by the Company’s insurance carriers and a mutual exchange of releases. The Stipulation of Settlement calls for a dismissal of all claims against the Company and the individual defendants with prejudice following Court approval, a denial by defendants of any wrongdoing, and no admission of liability. On February 15, 2018, Lead Plaintiff filed an Unopposed Motion for Preliminary Approval of Class Action Settlement. On February 21, 2018, the Court entered an Order Preliminarily Approving Settlement and Providing for Notice. The final approval hearing has been scheduled for June 25, 2018. A current liability of $50,000 was recorded for the agreed upon settlement amount and an offsetting receivable of $50,000 was recorded for related insurance proceeds. Joint Appendix on August 28, 2017. Plaintiff filed its Opening Brief on September 11, 2017. The Company filed its Reply Brief on September 25, 2017. equitable accounting on the Company’s prevailing counterclaim against Mr. Barranco. The bench trial took place on November 20, 2017. The court ordered the submission of proposed findings of fact and conclusions of law. The Company submitted its proposed Findings of Fact and Conclusions of Law on January 12, 2018. Barranco submitted his on February 2, 2018. The Company submitted its Reply on February 16, 2018. On March 30, 2018, the court entered Findings of Fact and Conclusions of Law and Order requiring Barranco to disgorge, and the Company to recover, $522.9, representing all but four months of the full amount paid to Barranco as salary during his employment with the Company as well as a portion of the up front and buyout payments made to Barranco in connection with the purchase of certain web domains. In addition, the Court ordered Barranco to pay pre-judgment interest to the Company to be calculated beginning as of his first breach of the non-competition covenant in August 2011. Judgment entered thereafter on April 2, 2018. As the prevailing party, the Company has moved for recovery of its fees and costs. The motion is pending before the court. On April 19, 2018, Barranco filed a post-trial motion seeking to amend the findings and judgment. The Company will oppose that motion. this matter. (in thousands) Foreign currency translation adjustment Defined benefit pension plan Total Balance at December 31, 2016 $ $ $ Other comprehensive income Balance at March 31, 2017 $ $ $ materials. 2017. 2017. Beginning in 2018, we have classified product warranty revenue and related expenses within products and we have reclassified prior period amounts from services to products to conform to current year presentation. (Dollars in thousands) Products Materials Services Totals Revenue – first quarter 2016 $ % $ % $ % $ % Change in revenue: Volume Price/Mix — — Foreign currency translation Net change Revenue – first quarter 2017 $ % $ % $ % $ % foreign currency, offset by changes in product mix which impacted average selling prices from the shift to higher sales of lower priced printers. For the quarters ended March 31, 2018 and 2017, revenue from printers contributed $39.1 million and (Dollars in thousands) Americas EMEA Asia Pacific Total Revenue – first quarter 2016 $ % $ % $ % $ % Change in revenue: Volume Price/Mix Foreign currency translation Net change Revenue – first quarter 2017 $ % $ % $ % $ % For the quarters ended March 31, 2018 and 2017, software services revenue contributed $10.8 million and 2017. Quarter Ended March 31, 2017 2016 Change in Gross Profit Change in Gross Profit Margin (Dollars in thousands) Gross Profit Gross Profit Margin Gross Profit Gross Profit Margin $ % Percentage Points % Products $ % $ % $ % % Materials Services Total $ % $ % $ % % 2017. Quarter Ended March 31, 2017 2016 Change (Dollars in thousands) Amount % Revenue Amount % Revenue $ % Selling, general and administrative expenses $ % $ % $ % Research and development expenses Total operating expenses $ % $ % $ % legal expenses. Research and development expenses increased primarily software as well as the addition of talent and resources. 2017. Quarter Ended March 31, (Dollars in thousands) 2017 2016 Income (loss) from operations Americas $ $ Germany Other EMEA Asia Pacific Subtotal Inter-segment elimination Total $ $ Quarter Ended March 31, (Dollars in thousands) 2017 2016 Interest and other expense, net: Interest income $ $ Foreign exchange gain Interest expense Other expense, net Total interest and other income, net $ $ Quarter Ended March 31, (Dollars in thousands) 2017 2016 Change Operating loss $ $ $ Less: Interest and other income, net Provision for income taxes Net income (loss) attributable to noncontrolling interests Net loss attributable to 3D Systems $ $ $ Net loss per share — basic and diluted $ $ Liquidity and Capital Resources Change (Dollars in thousands) March 31, 2017 December 31, 2016 $ % Cash and cash equivalents $ $ $ % Accounts receivable: Gross accounts receivable Allowance for doubtful accounts Accounts receivable, net Inventories: Raw materials Work in process Finished goods Inventories, gross Inventory reserves Inventories, net Prepaid expenses and other current assets Total current assets $ $ $ % Current portion of debt and capitalized lease obligations Accounts payable Accrued and other liabilities Customer deposits Deferred revenue Total current liabilities $ $ $ % Working capital $ $ $ % Stockholders' equity attributable to 3D Systems Corporation $ $ $ % assets. further analysis. Cash equivalents 2017. Quarter Ended March 31, 2017 2016 (Dollars in thousands) Cash provided by operating activities $ $ Cash used in investing activities Cash used in financing activities Effect of exchange rate changes on cash Net increase (decrease) in cash and cash equivalents $ $ for the quarter ended March 31, 2018 was $1.5 million and cash generated by operating activities for the quarter ended March 31, 2017 was $19.4 million. Excluding non-cash charges, net income provided cash of $2.9 million for the three months ended March 31, 2018 and $11.3 million for the three months ended March 31, 2017. Non-cash charges generally consist of depreciation, amortization, and stock-based compensation. Quarter Ended March 31, 2017 2016 (Dollars in thousands) Net loss $ $ Non-cash charges Changes in working capital and all other operating assets Net cash provided by operating activities $ $ Quarter Ended March 31, 2017 2016 (Dollars in thousands) Cash paid for acquisitions, net of cash assumed $ $ — Purchases of property and equipment Proceeds from disposition of property and equipment — Additions to license and patent costs Net cash used in investing activities $ $ Quarter Ended March 31, 2017 2016 (Dollars in thousands) Payments on earnout consideration $ $ — Repurchase of stock, net, and employer paid tax on employee awards Repayment of capital lease obligations Net cash used in financing activities $ $ Contractual commitments andPART I — FINANCIAL INFORMATIONItem 1. Financial Statements.3D SYSTEMS CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS
2017
(unaudited)
2016161,662 184,947 124,581 127,114 105,105 103,331 17,909 17,558 409,257 432,950 84,803 79,978 122,594 121,501 215,156 181,230 7,958 8,123 25,862 25,371 865,630 849,153 584 572 40,752 40,514 48,736 49,968 6,549 5,857 45,079 33,494 141,700 130,405 7,454 7,587 18,289 17,601 54,863 57,988 222,306 213,581 8,872 8,872 115 115 1,307,561 1,307,428 (3,746) (2,658) (621,552) (621,787) (44,874) (53,225) 637,504 629,873 (3,052) (3,173) 634,452 626,700 865,630 849,153 (In thousands, except par value) March 31,
2018
(unaudited) December 31,
2017ASSETS Current assets: Cash and cash equivalents $ 121,607 $ 136,344 Accounts receivable, net of reserves — $11,246 (2018) and $10,258 (2017) 134,470 129,879 Inventories 110,383 103,903 Insurance proceeds receivable 50,000 50,000 Prepaid expenses and other current assets 22,761 18,296 Total current assets 439,221 438,422 Property and equipment, net 101,675 97,521 Intangible assets, net 91,800 98,783 Goodwill 235,323 230,882 Deferred income tax asset 3,965 4,020 Other assets, net 25,674 27,136 Total assets $ 897,658 $ 896,764 LIABILITIES AND EQUITY Current liabilities: Current portion of capitalized lease obligations $ 661 $ 644 Accounts payable 55,405 55,607 Accrued and other liabilities 66,442 65,899 Accrued litigation settlement 50,000 50,000 Customer deposits 5,718 5,765 Deferred revenue 39,694 29,214 Total current liabilities 217,920 207,129 Long term portion of capitalized lease obligations 6,932 7,078 Deferred income tax liability 8,031 8,983 Other liabilities 46,665 48,754 Total liabilities 279,548 271,944 Redeemable noncontrolling interests 8,872 8,872 Commitments and contingencies (Note 13) Stockholders’ equity: Common stock, $0.001 par value, authorized 220,000 shares; issued 117,180 (2018) and 117,025 (2017) 116 115 Additional paid-in capital 1,333,378 1,326,250 Treasury stock, at cost — 2,358 shares (2018) and 2,219 shares (2017) (9,041 ) (8,203 ) Accumulated deficit (698,157 ) (677,772 ) Accumulated other comprehensive loss (14,137 ) (21,536 ) Total 3D Systems Corporation stockholders' equity 612,159 618,854 Noncontrolling interests (2,921 ) (2,906 ) Total stockholders’ equity 609,238 615,948 Total liabilities, redeemable noncontrolling interests and stockholders’ equity $ 897,658 $ 896,764 See accompanying notes to condensed consolidated financial statements.33D SYSTEMS CORPORATIONCONDENSED CONSOLIDATED STATEMENTSOFOPERATIONS AND COMPREHENSIVE INCOME (LOSS)(Unaudited)94,730 90,964 61,701 61,591 156,431 152,555 44,748 44,161 31,497 30,881 76,245 75,042 80,186 77,513 66,405 73,967 22,852 20,305 89,257 94,272 (9,071) (16,759) (201) (126) (8,870) (16,633) 1,041 1,179 (9,911) (17,812) 60 (24) (9,971) (17,788) (0.09) (0.16) 20 (31) 8,392 7,939 8,412 7,908 61 89 8,351 7,819 (1,499) (9,904) 121 65 (1,620) (9,969) Quarter Ended March 31, (in thousands, except per share amounts) 2018 2017 Revenue: Products $ 105,125 $ 97,039 Services 60,763 59,392 Total revenue 165,888 156,431 Cost of sales: Products 55,093 47,257 Services 32,913 28,988 Total cost of sales 88,006 76,245 Gross profit 77,882 80,186 Operating expenses: Selling, general and administrative 69,497 66,405 Research and development 25,883 22,852 Total operating expenses 95,380 89,257 Loss from operations (17,498 ) (9,071 ) Interest and other (expense) income, net (1,525 ) 201 Loss before income taxes (19,023 ) (8,870 ) Provision for income taxes 1,954 1,041 Net loss (20,977 ) (9,911 ) Less: net income (loss) attributable to noncontrolling interests (16 ) 60 Net loss attributable to 3D Systems Corporation $ (20,961 ) $ (9,971 ) Net loss per share available to 3D Systems Corporation common stockholders - basic and diluted $ (0.19 ) $ (0.09 ) See accompanying notes to condensed consolidated financial statements.43D SYSTEMS CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVELOSS(Unaudited) Quarter Ended March 31, (in thousands, except per share amounts) 2018 2017 Net loss $ (20,977 ) $ (9,911 ) Other comprehensive income (loss), net of taxes: Pension adjustments (17 ) 20 Foreign currency translation 7,416 8,392 Total other comprehensive income (loss), net of taxes: 7,399 8,412 Total comprehensive income (loss), net of taxes (13,578 ) (1,499 ) Comprehensive income (loss) attributable to noncontrolling interests (15 ) 121 Comprehensive income (loss) attributable to 3D Systems Corporation $ (13,563 ) $ (1,620 ) See accompanying notes to condensed consolidated financial statements.3D SYSTEMS CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)(9,911) (17,812) 14,973 15,089 7,131 11,667 155 2,388 (1,069) (1,092) 5,336 21,544 (4,120) (7,984) 12 (434) (643) (5,956) (2,849) (4,056) 11,218 11,019 (852) (6,255) 19,381 18,118 (34,291) (5,620) (4,246) (280) (231) 24 (40,167) (4,477) (3,206) (1,088) (810) (142) (262) (4,436) (1,072) 1,937 1,562 (23,285) 14,131 184,947 155,643 161,662 169,774 200 214 573 1,707 5,379 5,760 718 1,779 3,208 Three Months Ended March 31, (In thousands) 2018 2017 Cash flows from operating activities: Net loss $ (20,977 ) $ (9,911 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 15,186 14,973 Stock-based compensation 7,128 7,131 Impairment of property and other assets 38 53 Impairment of cost method investments 1,373 — Provision for bad debts 1,017 155 Provision for deferred income taxes (898 ) (1,069 ) Changes in operating accounts, net of acquisitions: Accounts receivable (3,774 ) 5,672 Inventories (5,571 ) (4,116 ) Prepaid expenses and other current assets (3,667 ) 41 Accounts payable (647 ) (691 ) Accrued and other current liabilities 12,597 12,403 All other operating activities (3,344 ) (5,253 ) Net cash (used in) provided by operating activities (1,539 ) 19,388 Cash flows from investing activities: Purchases of property and equipment (10,764 ) (5,620 ) Additions to license and patent costs (230 ) (280 ) Cash paid for acquisitions, net of cash assumed — (34,291 ) Proceeds from disposition of property and equipment — 24 Net cash used in investing activities (10,994 ) (40,167 ) Cash flows from financing activities: Payments on earnout consideration (2,675 ) (3,206 ) Payments related to net-share settlement of stock-based compensation (837 ) (1,088 ) Repayment of capital lease obligations (128 ) (120 ) Net cash used in financing activities (3,640 ) (4,414 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash 1,438 1,926 Net decrease in cash, cash equivalents and restricted cash (14,735 ) (23,267 ) Cash, cash equivalents and restricted cash at the beginning of the period (a)136,831 185,248 Cash, cash equivalents and restricted cash at the end of the period (a)$ 122,096 $ 161,981 Cash interest payments $ 119 $ 200 Cash income tax payments, net $ 2,332 $ 573 Transfer of equipment from inventory to property and equipment, net (b)$ 666 $ 5,379 Transfer of equipment to inventory from property and equipment, net (c)$ 360 $ 718 Stock issued for acquisitions $ — $ 3,208 (a) The amounts for cash and cash equivalents shown above include restricted cash of $489 and $318 as of March 31, 2018 and 2017, respectively, and $487 and $301 as of December 31, 2017, and 2016, respectively, which were included in other assets, net in the condensed consolidated balance sheets. (b) Inventory is transferred from inventory to property and equipment at cost when the Company requires additional machines for training or demonstration or for placement into on-demand partson demand manufacturing services locations.(b)(c) 3D SYSTEMS CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(Unaudited) Common Stock (in thousands, except par value) Par Value $0.001 Additional Paid In Capital Treasury Stock Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total 3D Systems Corporation Stockholders' Equity Equity Attributable to Noncontrolling Interests Total Stockholders' Equity Balance at December 31, 2017 $ 115 $ 1,326,250 $ (8,203 ) $ (677,772 ) $ (21,536 ) $ 618,854 $ (2,906 ) $ 615,948 Issuance (repurchase) of stock 1 — (838 ) — — (837 ) — (837 ) Cumulative impact of change in accounting policy — — — 576 — 576 — 576 Stock-based compensation expense — 7,128 — — — 7,128 — 7,128 Net loss — — — (20,961 ) — (20,961 ) (16 ) (20,977 ) Pension adjustment — — — — (17 ) (17 ) — (17 ) Foreign currency translation adjustment — — — — 7,416 7,416 1 7,417 Balance at March 31, 2018 $ 116 $ 1,333,378 $ (9,041 ) $ (698,157 ) $ (14,137 ) $ 612,159 $ (2,921 ) $ 609,238 Common Stock (in thousands, except par value) Par Value $0.001 Additional Paid In Capital Treasury Stock Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total 3D Systems Corporation Stockholders' Equity Equity Attributable to Noncontrolling Interests Total Stockholders' Equity Balance at December 31, 2016 $ 115 $ 1,307,428 $ (2,658 ) $ (621,787 ) $ (53,225 ) $ 629,873 $ (3,173 ) $ 626,700 Issuance (repurchase) of stock — — (1,088 ) — — (1,088 ) — (1,088 ) Issuance of stock for acquisitions — 3,208 — — — 3,208 — 3,208 Cumulative impact of change in accounting policy — (10,206 ) — 10,206 — — — — Stock-based compensation expense — 7,131 — — — 7,131 — 7,131 Net income (loss) — — — (9,971 ) — (9,971 ) 60 (9,911 ) Pension adjustment — — — — 20 20 — 20 Foreign currency translation adjustment — — — — 8,331 8,331 61 8,392 Balance at March 31, 2017 $ 115 $ 1,307,561 $ (3,746 ) $ (621,552 ) $ (44,874 ) $ 637,504 $ (3,052 ) $ 634,452 See accompanying notes to condensed consolidated financial statements.5CONDENSED CONSOLIDATED STATEMENT OF EQUITY(Unaudited)115,113 115 1,307,428 1,498 (2,658) (621,787) (53,225) 629,873 (3,173) 626,700 114 133 (1,088) (1,088) (1,088) 192 3,208 3,208 3,208 (10,206) 10,206 7,131 7,131 7,131 (9,971) (9,971) 60 (9,911) 20 20 20 8,331 8,331 61 8,392 115,419 115 1,307,561 1,631 (3,746) (621,552) (44,874) 637,504 (3,052) 634,452 See accompanying notes to condensed consolidated financial statements.63D SYSTEMS CORPORATION(Unaudited)(1) Basis of PresentationThe accompanying unaudited condensed consolidated financial statements include the accounts of 3D Systems Corporation and itsall majority-owned subsidiaries (collectively,and entities in which a controlling interest is maintained (the “Company”). A non-controlling interest in a subsidiary is considered an ownership interest in a majority-owned subsidiary that is not attributable to the “Company”).parent. The Company includes noncontrolling interests as a component of total equity in the condensed consolidated balance sheets and the net income (loss) attributable to noncontrolling interests are presented as an adjustment from net loss used to arrive at net loss attributable to 3D Systems Corporation in the condensed consolidated statements of operations and comprehensive loss. All significant intercompany transactions and balances have been eliminated in consolidation.The unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim reports. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements and should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20162017 (“Form 10-K”).In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments, consisting of adjustments of a normal recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The results of operations for the quarter ended March 31, 20172018 are not necessarily indicative of the results to be expected for the full year. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results may differ from those estimates and assumptions. Certain prior period amounts presented in the condensed consolidated financial statements and accompanying footnotes have been reclassified to conform to current year presentation. Beginning in 2018, the Company classifies standard product warranty revenue and related expenses within the "Products" line items of the Consolidated Statements of Operations.All dollar amounts presented in the accompanying footnotes are presented in thousands, except for per share information.Recently Adopted Accounting PronouncementsIn the first quarter ofMay 2017, the Company adopted Financial Accounting Standards Board (“FASB”)Accounting Standards Update (“ASU”)FASB issued ASU No. 2016-09,2017-09, “Compensation –- Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment: Scope of Modification Accounting”. The following summarizes (“ASU 2017-09”), in an effort to reduce diversity and clarify what constitutes a modification, as it relates to the change in terms or conditions of a share-based payment award. According to ASU 2017-09, the Company should account for the effects of a modification unless all of the following are met: (1) the fair value of the modified award is the same as the fair value the original award immediately before the original award is modified, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments in ASU 2017-09 are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted. The Company adopted ASU 2017-09 beginning January 1, 2018 and the implementation of this guidance did not have a material effect on the Company’s unaudited condensedits consolidated financial statements:statements.Forfeitures - Prior to adoption, share-based compensation expense was recognized on a straight-line basis, net of estimated forfeitures, such that expense was recognized only for share-based awards that were expected to vest. A forfeiture rate was estimated annually and revised, if necessary, in subsequent periods if actual forfeitures differed from initial estimates. Upon adoption, the Company will no longer apply a forfeiture rate and instead will account for forfeitures as they occur. The change was applied on a modified retrospective basis resulting in a cumulative effect adjustment to retained earnings of $10,206 as of January 1, 2017. Prior periods have not been adjusted.Statement of Cash Flows - The Company historically accounted for excess tax benefits related to share-based compensation on the Statement of Cash Flows as a financing activity. Upon adoption of this standard, excess tax benefits are classified along with other income tax cash flows as an operating activity. The Company has elected to adopt this portion of the standard on a prospective basis beginning in 2017. Prior periods have not been adjusted.Income taxes - Upon adoption of this standard, all excess tax benefits and tax deficiencies related to share-based compensation are recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur. Prior periods have not been adjusted.Recently Issued Accounting PronouncementsIn March 2017, the FASB issued ASU No. 2017-07, “Compensation –- Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU 2017-07”), which standardizes the presentationof net benefit cost in the income statement and on the components eligible for capitalization in assets. ASU 2017-07 is effective for fiscal years beginning after December 15, 2017, including interim periods within those annual periods. The amendments in ASU 2017-07 should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. The Company will adoptadopted ASU 2017-07 in the first quarter of 2018 and does not expect the implementation of this guidance todid not have a material effect on its consolidated financial statements.7On January 1, 2018, the Company adopted ASC Topic 606, “Revenue from Contracts with Customers.” The standard outlines a five-step model whereby revenue is recognized as performance obligations within a contract are satisfied. The standard also requires new, expanded disclosures regarding revenue recognition. The Company adopted the standard using the modifiedretrospective transition method and applied its guidance to contracts not completed at the adoption date. The cumulative effect of initial adoption was recorded as a $576 decrease to the January 1, 2018 opening Accumulated Deficit balance and driven primarily by the timing of recognition related to marketing incentives. The effect of this adoption was immaterial to the Consolidated Financial Statements, and the Company does not expect a material effect to its Consolidated Financial Statements on an ongoing basis. Information for comparative periods has not been restated and continues to be reported under the previously applicable revenue accounting guidance ("ASC 605"). Had ASC 605 been applied to the first quarter of 2018, the Consolidated Statements of Operations and Comprehensive Loss would have shown increased Revenue and a decrease in Net Loss Attributable to 3D Systems Corporation of $46. On Consolidated Balance Sheets, Other Assets would have been $457 lower, Deferred Revenues would have been $73 higher and the Accumulated deficit would have increased by $530.Accounting Standards Issued But Not Yet AdoptedIn February 2018, the FASB issued ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" (ASU 2018-02), which provides companies with an option to reclassify stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. ASU 2018-02 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently in the process of evaluating when it will adopt ASU 2018-02 and its impact on its consolidated financial statements.In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”), in order to create more transparency around how economic results are presented within both the financial statements and in the footnotes and to better align the results of cash flow and fair value hedge accounting with risk management activities. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently in the process of evaluating when it will adopt ASU 2017-12 and its impact on its consolidated financial statements.In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”), which eliminates the performance of Step 2 from the goodwill impairment test. In performing its annual or interim impairment testing, an entity will instead compare the fair value of the reporting unit with its carrying amount and recognize any impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss. The standard is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual impairment tests performed on testing dates after January 1, 2017. The Company is currently in the process of evaluating when it will adopt ASU 2017-04 and its impact on its consolidated financial statements.In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory” (“ASU 2016-16”). ASU 2016-16 permits the recognition of income tax consequences related to an intra-entity transfer of an asset other than inventory when the transfer occurs. It is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those annual periods. Early adoption is permitted for any interim or annual period. The Company is currently in the process of evaluating the impact of adoption of ASU 2016-16 on its consolidated financial statements.In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). With the objective of reducing the existing diversity in practice, ASU 2016-15 addresses the manner in which certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017. The amendments should be applied retrospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company expects that the implementation of this guidance will not have a material effect on its consolidated financial statements.In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize assets and liabilities arising from operating leases on the balance sheet. Itsheet for all leases with terms longer than twelve months. The ASU also requires disclosure of key information about leasing arrangements. ASU 2016-02 is effective for annual reporting periods beginning after December 15,on January 1, 2019, using a modified retrospective method of adoption as of January 1, 2017. In January 2018, including interim periods within those fiscal years.the FASB issued an exposure draft of the proposed ASU, Leases (Topic 842): Targeted Improvements. The proposed ASU provides an alternative transition method of adoption, permitting the recognition of a cumulative-effect adjustment to retained earnings on the date of adoption. The Company will adopt the standard on the effective date, but has not yet selected a transition method. The Company is reviewing its population of leased assets to determine potential impacts on its consolidated financial statements. Though still evaluating the impact of ASU 2016-02,its evaluation is ongoing, the Company expects changes to its balance sheet due to the recognition of right-of-use assets and lease liabilities related to its real estate leases, but it does not anticipate material impacts to its results of operations or liquidity.In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date” (“ASU 2015-14”), a revision to Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers”, which was originally issued on May 28, 2014. For public business entities, certain not-for-profit entities, and certain employee benefit plans, the effective date was for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. ASU 2015-14 will defer these effective dates for all entities by one year. During 2016, the Company continued its evaluation of ASU 2014-09, including the expected impact on its business processes, systems and controls, and potential differences in the timing and/or method of revenue recognition for its contracts. The Company expects to complete its assessment of the cumulative effect of adopting ASU 2014-09 as well as the expected impact of adoption during 2017. The Company will continue its evaluation of ASU 2014-09, including how it may impact new contracts it receives as well as new or emerging interpretations of the standard, through the date of adoption.No other new accounting pronouncements, issued or effective during the first quarter of 2017,2018, have had or are expected to have a significant impact on the Company’s consolidated financial statements.(2) AcquisitionsOnRevenueThe Company accounts for revenue in accordance with ASC Topic 606, “Revenue from Contracts with Customers,” which it adopted on January 1, 2018, using the modified-retrospective method. See Note 1 for further discussion of the adoption.Performance ObligationsA performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.At March 31, 2017,2018, the Company acquired 100had $157,531 of outstanding performance obligations. The Company expects to recognize approximately 95 percent of its remaining performance obligations as revenue within the sharesnext twelve months, an additional 3 percent by the end of Vertex-Global Holding B.V. (“Vertex”), a provider of dental materials worldwide under2019 and the Vertex and NextDent brands. The cash portionbalance thereafter.Revenue RecognitionRevenue is recognized when control of the promised products or services is transferred to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Many of its contracts with customers include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price (“SSP”). Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. The amount of consideration we receive and revenue we recognize varies with changes in marketing incentives we offer to our customers. Our marketing incentives take many forms, including volume discounts, trade-in allowances, rebates and other discounts.A majority of the Company’s revenue is recognized at the point in time when products are shipped or or services are delivered to customers. Please see below for further discussion.Systems and MaterialsRevenue from systems and material sales is recognized when control has transferred to the customer which typically occurs when the goods have been shipped to the customer, risk of loss has transferred to the customer and the company has a present right to payment for the hardware. In limited circumstances when a systems sale includes substantive customer acceptance provisions, revenue is recognized either when customer acceptance has been obtained, customer acceptance provisions have lapsed, or the company has objective evidence that the criteria specified in the customer acceptance provisions have been satisfied.SoftwareThe Company also markets and sells software tools that enable our customers to capture and customize content using our printers, as well as reverse engineering and inspection software. These software licenses do not require significant modification or customization and provide the customer with a right to use the software as it exists when made available. Revenue from these software licenses is recognized either upon delivery of the product or of a key code which allows the customer to download the software. Customers may purchase pricepost sale support. Generally, the first year is included in cash paidbut subsequent years are optional. This optional support is considered a separate obligation from the software and is deferred at the time of sale and subsequently recognized ratably over future periods.ServicesThe Company offers training, installation and non-contract maintenance services for acquisitions, netits products. Additionally, the Company offers extended warranties and maintenance contracts customers can purchase at their option. For optional warranty or maintenance contracts, revenue is deferred at the time of cash assumed, insale based on the unaudited Condensed Consolidated Statementstand-alone selling prices of Cash Flows. The share portionthese services and costs are expensed as incurred. Deferred revenue is recognized ratably over the term of the purchase pricewarranty or maintenance period on a straight-line basis. Revenue from training, installation and non-contract maintenance services is recognized at the time of performance of the service.On demand manufacturing and healthcare service sales are included within services revenue and revenue is recognized upon shipment or delivery of the parts or performance of the service, based on the terms of the arrangement.Terms of saleShipping and handling activities are treated as fulfillment costs rather than as an additional promised service. The Company accrues the costs of shipping and handling when the related revenue is recognized. Costs incurred by the Company associated with shipping and handling are included in issuanceproduct cost of stocksales.Credit is extended, and creditworthiness is determined, based on an evaluation of each customer’s financial condition. New customers are generally required to complete a credit application and provide references and bank information to facilitate an analysis of creditworthiness. Customers with a favorable profile may receive credit terms that differ from the Company’s general credit terms. Creditworthiness is considered, among other things, in evaluating the Company’s relationship with customers with past due balances.The Company’s terms of sale generally require payment within 30 to 60 days after shipment of a product, although the Company also recognizes that longer payment periods are customary in some countries where it transacts business. To reduce credit risk in connection with printer sales, the Company may, depending upon the circumstances, require significant deposits prior to shipment and may retain a security interest in a system sold until fully paid. In some circumstances, the Company may require payment in full for acquisitionsits products prior to shipment and may require international customers to furnish letters of credit. For maintenance services, the Company either bills customers on a time-and-materials basis or sells maintenance contracts that provide for payment in advance on either an annual or other periodic basis.See Note 12 for additional information related to revenue by reportable segment and major lines of business.Significant JudgmentsThe Company’s contracts with customers often include promises to transfer multiple products and services to a customer. For such arrangements, the unaudited CondensedCompany allocates revenues to each performance obligation based on its relative SSP.Judgment is required to determine the SSP for each distinct performance obligation in a contract. For the majority of items, the Company estimates SSP using historical transaction data. The Company uses a range of amounts to estimate SSP when we sell each of the products and services separately and need to determine whether there is a discount to be allocated based on the relative SSP of the various products and services. In instances where SSP is not directly observable, such as when the product or service are not sold separately, the Company determines the SSP using information that may include market conditions and other observable inputs.In some circumstances, the Company has more than one SSP for individual products and services due to the stratification of those products and services by customers, geographic region or other factors. In these instances, it may use information such as the size of the customer and geographic region in determining the SSP.The determination of SSP is in ongoing process and information is reviewed regularly in order to ensure SSPs reflect the most current information or trends.Often, the nature of the Company’s marketing incentives lead to consideration that is variable. Judgment is exercised at contract inception to determine the most likely outcome of the contract and resulting transaction price. Ongoing assessments are performed to determine if updates are needed to the original estimatesContract BalancesThe timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer deposits and deferred revenues (contract liabilities) on the Consolidated StatementBalance Sheets. Timing of Equity.revenue recognition may differ from the timing of invoicing to customers. The operating resultsCompany records a receivable when revenue is recognized at the time of Vertexinvoicing, or unbilled receivables when revenue is recognized prior to invoicing. For most of the Company’s contracts, customers are invoiced when products are shipped or when services are performed resulting in billed accounts receivables where payment is generally required within 30 to 60 days. Unbilled receivables generally result from items being shipped where the customer has not been charged but for which revenue had been recognized. In the Company’s on-demand manufacturing business, customers may be required to pay in full before work begins on their orders, resulting in customer deposits. The Company typically bills in advance for installation, training and maintenance contracts as well as extended warranties, resulting in deferred revenue. Changes in contract asset and liability balances were not materially impacted by any other factors for the period ended March 31, 2018.In the first quarter of 2018, we recognized revenue of $15,318 related to our contract liabilities at January 1, 2018.Practical Expedients and ExemptionsThe Company generally expenses sales commissions when incurred because the amortization period would have been included in the Company’s reported results since the closing date. The purchase price of the acquisition has been allocated to the estimated fair value of net tangibleone year or less. These costs are recorded within selling, general and intangible assets acquired, with any excess purchase price recorded as goodwill. The Company did not acquire any businesses in 2016.administrative expenses.8(3) InventoriesComponents of inventories, net, as ofat March 31, 20172018 and December 31, 2016 were2017 are summarized as follows:38,651 38,383 4,143 3,109 62,311 61,839 105,105 103,331 (in thousands) 2018 2017 Raw materials $ 39,124 $ 37,660 Work in process 3,950 3,906 Finished goods and parts 67,309 62,337 Inventories $ 110,383 $ 103,903 (4) Property and EquipmentProperty and equipment, net, as of March 31, 2017 and December 31, 2016 were as follows:903 903 11,122 11,122 116,831 108,682 8,709 8,651 3,507 3,130 25,037 24,423 452 144 9,125 7,760 175,686 164,815 (90,883) (84,837) 84,803 79,978 (a)Leasehold improvements are amortized on a straight-line basis over the shorter of (i) their estimated useful lives and (ii) the estimated or contractual life of the related lease.For the quarters ended March 31, 2017 and 2016, depreciation expense on property and equipment was $5,873 and $6,000, respectively.(5) Intangible AssetsIntangible assets, net, other than goodwill, as ofat March 31, 20172018 and December 31, 2016 were2017 are summarized as follows:16,969 (6,337) 10,632 16,263 (5,873) 10,390 54,192 (31,125) 23,067 52,881 (27,543) 25,338 16,982 (11,093) 5,889 17,047 (9,454) 7,593 103,106 (49,576) 53,530 99,067 (46,252) 52,815 19,254 (9,926) 9,328 19,530 (7,919) 11,611 32,926 (16,936) 15,990 28,110 (16,015) 12,095 23,971 (19,813) 4,158 22,953 (21,294) 1,659 267,400 (144,806) 122,594 255,851 (134,350) 121,501 2018 2017 (in thousands) Gross Accumulated Amortization Net Gross Accumulated Amortization Net Weighted Average Useful Life Remaining (in years) Intangible assets with finite lives: Customer relationships $ 107,094 $ (61,287 ) $ 45,807 $ 105,505 $ (57,796 ) $ 47,709 6 Acquired technology 50,370 (38,108 ) 12,262 54,716 (39,644 ) 15,072 2 Trade names 25,972 (16,381 ) 9,591 25,813 (15,552 ) 10,261 6 Patent costs 18,230 (8,069 ) 10,161 17,909 (7,338 ) 10,571 15 Trade secrets 19,601 (12,117 ) 7,484 19,431 (11,530 ) 7,901 4 Acquired patents 16,690 (12,390 ) 4,300 16,661 (11,969 ) 4,692 8 Other 20,270 (18,075 ) 2,195 20,012 (17,435 ) 2,577 2 Total intangible assets $ 258,227 $ (166,427 ) $ 91,800 $ 260,047 $ (161,264 ) $ 98,783 6 (a) Change in gross carrying amounts consists primarily of charges for license and patent costs and foreign currency translation.Amortization expense related to intangible assets was $8,832$8,067 and $8,819$8,832 for the quarters ended March 31, 2018 and 2017, and 2016, respectively.9(5) Accrued and Other LiabilitiesAccrued liabilities as ofat March 31, 20172018 and December 31, 2016 were2017 are summarized as follows:20,256 22,771 8,531 8,231 538 810 9,887 9,831 2,417 2,092 112 39 3,971 3,238 3,024 2,956 48,736 49,968 (in thousands) 2018 2017 Compensation and benefits $ 19,496 $ 20,432 Accrued taxes 16,457 13,861 Arbitration awards 11,282 11,282 Vendor accruals 7,078 7,044 Product warranty liability 5,855 5,564 Accrued earnouts related to acquisitions 2,556 2,772 Accrued other 1,350 2,485 Royalties payable 1,570 1,679 Accrued professional fees 686 742 Accrued interest 112 38 Total $ 66,442 $ 65,899 Other liabilities as ofat March 31, 20172018 and December 31, 2016 were2017 are summarized as follows:11,282 11,282 11,974 11,152 7,742 7,613 7,190 7,183 3,897 7,568 7,019 7,464 5,759 5,726 54,863 57,988 (7)(in thousands) 2018 2017 Long term employee indemnity $ 13,900 $ 13,887 Defined benefit pension obligation 8,528 8,290 Long term deferred revenue 7,660 7,298 Other long term liabilities 7,237 7,596 Long term tax liability 9,340 9,340 Long term earnouts related to acquisitions — 2,343 Total $ 46,665 $ 48,754 (6) Hedging Activities and Financial InstrumentsThe Company conducts business in various countries using both the functional currencies of those countries and other currencies to effect cross border transactions. As a result, the Company is subject to the risk that fluctuations in foreign exchange rates between the dates that those transactions are entered into and their respective settlement dates will result in a foreign exchange gain or loss. When practicable, the Company endeavors to match assets and liabilities in the same currency on its balance sheet and those of its subsidiaries in order to reduce these risks. When appropriate, the Company enters into foreign currency contracts to hedge exposures arising from those transactions. The Company has elected not to prepare and maintain the documentation to qualify for hedge accounting treatment under Accounting Standards Codification (“ASC”) 815, “Derivatives and Hedging,” and therefore, all gains and losses (realized or unrealized) are recognized in “Interest and other income,expense, net” in the condensed consolidated statements of operations and comprehensive income (loss).loss. Depending on their fair value at the end of the reporting period, derivatives are recorded either in prepaid expenses and other current assets or in accrued liabilities on the condensed consolidated balance sheet.The Company had $35,302$40,752 and $39,600 in notional foreign exchange contracts outstanding as of March 31, 2018 and December 31, 2017, for which therespectively. The fair value wasvalues of these contracts were not material. No foreign exchange contracts were outstanding as of December 31, 2016. The Company translates foreign currency balance sheets from each international businesses' functional currency (generally the respective local currency) to U.S. dollars at end-of-period exchange rates, and statements of earnings at average exchange rates for each period. The resulting foreign currency translation adjustments are a component of other comprehensive income (loss).The Company does not hedge the fluctuation in reported revenue and earnings resulting from the translation of these international operations' results into U.S. dollars. The impact of translating the Company’s non-U.S. operations’ revenue and earnings into U.S. dollars was not material to the Company’s results of operations for the quarters ended March 31, 20172018 and 2016.2017.10(7) BorrowingsCredit FacilityAs of March 31, 2017,2018, the Company had a $150,000 revolving, unsecured credit facility (the “Credit Agreement”) with a syndicate of banks, to be used for general corporate purposes and working capital needs. The Credit Agreement is scheduled to expire in October 2019. The Credit Agreement includes provisions for the issuance of letters of credit and swingline loans and contains certain restrictive covenants, which include the maintenance of a maximum consolidated total leverage ratio. The Company was in compliance with those covenants at March 31, 20172018 and December 31, 2016.2017. There were no outstanding borrowings as of March 31, 2017.Capitalized Lease ObligationsThe Company’s capitalized lease obligations primarily include a lease agreement that was entered into during 2006 with respect to the Company’s corporate headquarters located in Rock Hill, SC. CapitalizedThe change in capitalized lease obligations, decreased to $8,038 at March 31, 2017 from $8,159 at December 31, 2016,as presented in the Condensed Consolidated Balance Sheets, was due to the normal scheduled timing of payments.(9)(8) Pension BenefitsThe components of the Company’s pension cost recognized in the condensed consolidated statements of operations and comprehensive income (loss)loss for the quarters ended March 31, 20172018 and 20162017 were as follows:67 83 65 73 58 32 190 188 (10) Quarter Ended March 31, (in thousands) 2018 2017 Service cost $ 52 $ 67 Interest cost 73 65 Amortization of actuarial loss 46 58 Total periodic cost $ 171 $ 190 (9) Net Loss Per ShareThe Company computes basic loss per share using net loss attributable to 3D Systems Corporation and the weighted average number of common shares outstanding during the applicable period. Diluted loss per share incorporates the additional shares issuable upon assumed exercise of stock options and the release of restricted stock and restricted stock units, except in such case when their inclusion would be anti-dilutive.(9,971) (17,788) 111,289 112,197 (0.09) (0.16) Quarter Ended March 31, (in thousands, except per share amounts) 2018 2017 Numerator for basic and diluted net loss per share: Net loss attributable to 3D Systems Corporation $ (20,961 ) $ (9,971 ) Denominator for basic and diluted net loss per share: Weighted average shares 111,819 111,289 Net loss per share - basic and diluted $ (0.19 ) $ (0.09 ) For the quarters ended March 31, 20172018 and 2016,2017, the effect of dilutive securities, including non-vested stock options and restricted stock awards/units, was excluded from the denominator for the calculation of diluted net loss per share because the Company recognized a net loss for the period and their inclusion would be anti-dilutive. The effect of dilutiveDilutive securities excluded was 5,503 weighted average shareswere 4,345 and 88 weighted average shares3,396 for the quarters ended March 31, 2018 and 2017, and 2016, respectively.(11)(10) Fair Value MeasurementsASC 820, “Fair Value Measurements and Disclosures,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs that may be used to measure fair value:11Level 1 - Quoted prices in active markets for identical assets or liabilities;·Level 1 - Quoted prices in active markets for identical assets or liabilities;··Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.For the Company, the above standard applies to cash equivalents and earnout consideration. The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.Assets and liabilities measured at fair value on a recurring basis are summarized below:24,133 24,133 7,868 7,868 25,206 25,206 10,806 10,806 Fair Value Measurements as of March 31, 2018 (in thousands) Level 1 Level 2 Level 3 Total Description Cash equivalents (a)$ 40,891 $ — $ — $ 40,891 Earnout consideration (b)$ — $ — $ 2,556 $ 2,556 Fair Value Measurements as of December 31, 2017 (in thousands) Level 1 Level 2 Level 3 Total Description Cash equivalents (a)$ 20,244 $ — $ — $ 20,244 Earnout consideration (b)$ — $ — $ 5,115 $ 5,115 (a) (b) $3,206$2,675 payment, partially offset by$268 $115 of accretion.The Company did not have any transfers of assets and liabilities between Level 1, Level 2 and Level 3 of the fair value measurement hierarchy during the quarter ended March 31, 2017.In addition to the assets and liabilities included in the above table, certain of our assets and liabilities are to be initially measured at fair value on a non-recurring basis. This includes goodwill and other intangible assets measured at fair value for impairment assessment, in addition to redeemable noncontrolling interests. For additional discussion, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Estimates” in ourthe Company’s Form 10-K.(12)(11) Income TaxesFor the quarters ended March 31, 20172018 and 2016,2017, the Company recorded provisionsexpense of $1,041$1,954 and $1,179,$1,041, respectively, resulting in effective tax rates of 11.7%10.3% and 7.1%11.7%, respectively. In December 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but not providedlimited to, a corporate tax rate decrease from 35% to 21% effective for any taxestax years after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings, as of December 31, 2017.On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. As of December 31, 2017, the Company recorded provisional amounts, and additional work is still necessary for a more detailed analysis of the Company’s deferred tax assets and liabilities and its historical foreign earnings as well as potential correlative adjustments. Any subsequent adjustment to these amounts will be recorded in the quarter of 2018 when the analysis is complete.As the Company’s previously unremitted earnings have now been subjected to U.S. federal income tax, any repatriation of its foreign subsidiaries, as the Company intendsthese earnings to permanently reinvest all such earnings outside of the U.S. We believe a calculation of the deferred tax liability associated with these undistributed earnings is impracticable.would not be expected to incur significant additional taxes related to such amounts.12Tax years 2003 through 20152017 remain subject to examination by the U.S. Internal Revenue Service, with most of the years open to examination due to the generation and utilization of net operating losses.various tax credits. The Company files income tax returns (which are open to examination beginning in the year shown in parentheses) in Australia (2012)(2013), Belgium (2013)(2014), Brazil (2011)(2012), China (2013)(2014), France (2013)(2014), Germany (2013), India (2013), Israel (2012)(2013), Italy (2011)(2012), Japan (2012), Korea (2012), Mexico (2011)(2012), Netherlands (2011)(2012), Switzerland (2011)(2012), the United Kingdom (2015)(2016) and Uruguay (2011)(2012).(13)(12) Segment InformationThe Company operates inas one reportable business segment. The Companysegment and conducts its business through various offices and facilities located throughout the Americas region (United States, Canada, Brazil, Mexico and Uruguay), EMEA region (Belgium, France, Germany, Israel, Italy, the Netherlands, Switzerland and the United Kingdom), and Asia Pacific region (Australia, China, India, Japan and Korea), Europe (Belgium, France, Germany, Italy, the Netherlands, Switzerland and the United Kingdom), Israel, Latin America (Brazil, Mexico and Uruguay), Russia and the United States.. The Company has historically disclosed summarized financial information for the geographic areas of operations as if they were segments in accordance with ASC 280, “Segment Reporting.” Financial information concerning the Company’s geographical locations is based on the location of the selling entity. Such summarized financial information concerning the Company’s geographical operations is shown in the following tables:80,291 83,490 19,816 18,882 33,142 28,549 23,182 21,634 156,431 152,555 51,906 52,495 42,824 38,469 61,701 61,591 156,431 152,555 361 9,791 2,954 3,898 17,004 16 1,815 2 1,833 16,531 1,160 2,199 1,011 20,901 537 135 1,014 1,686 17,445 10,951 7,103 5,925 41,424 289 6,201 3,265 2,956 12,711 634 451 1,085 13,169 833 881 1,161 16,044 1,030 3 891 1,924 15,122 7,034 4,600 5,008 31,764 Quarter Ended March 31, (in thousands) 2018 2017 Revenue from unaffiliated customers: United States $ 82,730 $ 77,872 Other Americas 1,817 2,419 EMEA 57,416 52,958 Asia Pacific 23,925 23,182 Total revenue $ 165,888 $ 156,431 13(13,450) (14,186) 2,057 1,011 (1,524) (8,118) 4,341 5,182 (8,576) (16,111) (495) (648) (9,071) (16,759) 307,826 345,412 42,788 40,547 398,470 341,616 116,546 121,578 865,630 849,153 79,057 105,750 7,488 8,885 42,735 35,992 32,382 34,320 161,662 184,947 Quarter Ended March 31, (in thousands) 2018 2017 Revenue by class of product and service: Products $ 62,629 $ 54,215 Materials 42,496 42,824 Services 60,763 59,392 Total revenue $ 165,888 $ 156,431 (14) Quarter Ended March 31, 2018 Intercompany Sales to (in thousands) Americas EMEA Asia Pacific Total Americas $ 283 $ 15,498 $ 5,422 $ 21,203 EMEA 16,603 5,804 1,911 24,318 Asia Pacific 1,421 1 896 2,318 Total intercompany sales $ 18,307 $ 21,303 $ 8,229 $ 47,839 Quarter Ended March 31, 2017 Intercompany Sales to (in thousands) Americas EMEA Asia Pacific Total Americas $ 361 $ 12,745 $ 3,898 $ 17,004 EMEA 16,547 5,174 1,013 22,734 Asia Pacific 537 135 1,014 1,686 Total intercompany sales $ 17,445 $ 18,054 $ 5,925 $ 41,424 Quarter Ended March 31, (in thousands) 2018 2017 Loss from operations: Americas $ (18,924 ) $ (13,450 ) EMEA (2,005 ) 533 Asia Pacific 3,974 4,341 Subtotal (16,955 ) (8,576 ) Intercompany elimination (543 ) (495 ) Total $ (17,498 ) $ (9,071 ) (13) Commitments and ContingenciesThe Company leases certain of its facilities and equipment under non-cancelable operating leases. For the quarters ended March 31, 20172018 and 2016,2017, rent expense under operating leases was $4,267 and $3,682, and $3,256, respectively.Certain of the Company’s acquisitionsacquisition agreements contain earnout provisions under which the sellers of the acquired businesses can earn additional amounts. The total liability recorded for these earnouts at March 31, 20172018 and December 31, 20162017 was $7,868$2,556 and $10,806,$5,115, respectively. See Note 6. Put OptionsOwners of interests in a certain subsidiary have the right in certain circumstances to require the Company to acquire either a portion of or all of the remaining ownership interests held by them. The owners’ ability to exercise any such “put option” right is subject to the satisfaction of certain conditions, including conditions requiring notice in advance of exercise. In addition, these rights cannot be exercised prior to a specified exercise date. The exercise of these rights at their earliest contractual date would result in obligations of the Company to fund the related amounts in 2019.14Management estimates, assuming that the subsidiary owned by the Company at March 31, 2017,2018, performs over the relevant future periods at its forecasted earnings levels, that these rights, if exercised, could require the Company, in future periods, to pay approximately $8,872 to the owners of such rights to acquire such ownership interests in the relevant subsidiary. This amount has been recorded as redeemable noncontrolling interests on the balance sheetConsolidated Balance Sheet at March 31, 20172018 and December 31, 2016.2017. The ultimate amount payable relating to this transaction will vary because it is dependent on the future results of operations of the subject business.LitigationSecurities and Derivative LitigationThe Company and certain of its former executive officers have been named as defendants in a consolidated putative stockholder class action lawsuit pending in the United States District Court for the District of South Carolina. The consolidated action is styled KBC Asset Management NV v. 3D Systems Corporation, et al., Case No. 0:15-cv-02393-MGL. The Amended Consolidated Complaint (the “Complaint”), which was filed on December 9, 2015, alleges that defendants violated the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder by making false and misleading statements and omissions and that the former officers are control persons under Section 20(a) of the Exchange Act. The Complaint was filed on behalf of stockholders who purchased shares of the Company’s common stock between October 29, 2013, and May 5, 2015 and seeks monetary damages on behalf of the purported class. Defendants filed a motion to dismiss the Complaint in its entirety on January 14, 2016, which was denied by Memorandum Opinion and Order dated July 25, 2016 (the “Order”). Defendants filed a motion for reconsideration of the Order on August 4, 2016, which was denied by Order dated February 24, 2017.Nine related derivative complaints have been filed by purported Company stockholders against certain of the Company’s former executive officers and members of its Board of Directors. The Company is named as a nominal defendant in all nine actions. The derivativesderivative complaints are styled as follows: (1) Steyn v. Reichental, et al., Case No. 2015-CP-46-2225, filed on July 27, 2015 in the Court of Common Pleas for the 16th Judicial Circuit, County of York, South Carolina (“Steyn”); (2) Piguing v. Reichental, et al., Case No. 2015-CP-46-2396, filed on August 7, 2015 in the Court of Common Pleas for the 16th Judicial Circuit, County of York, South Carolina (“Piguing”); (3) Booth v. Reichental, et al., Case No. 15-692-RGA, filed on August 6, 2015 in the United States District Court for the District of Delaware; (4) Nally v. Reichental, et al., Case No. 15-cv-03756-MGL, filed on September 18, 2015 in the United States District Court for the District of South Carolina (“Nally”); (5) Gee v. Hull, et al., Case No. BC-610319, filed on February 17, 2016 in the Superior Court for the State of California, County of Los Angeles (“Gee”); (6) Foster v. Reichental, et al., Case No. 0:16-cv-01016-MGL, filed on April 1, 2016 in the United States District Court for the District of South Carolina (“Foster”); (7) Lu v. Hull, et al., Case No. BC629730, filed on August 5, 2016 in the Superior Court for the State of California, County of Los Angeles (“Lu”); (8) Howes v. Reichental, et al., Case No. 0:16-cv-2810-MGL, filed on August 11, 2016 in the United States District Court for the District of South Carolina (“Howes”); and (9) Ameduri v. Reichental, et al., Case No. 0:16-cv-02995-MGL, filed on September 1, 2016 in the United States District Court for the District of South Carolina (“Ameduri”). Steyn and Piguing were consolidated into one action styled as In re 3D Systems Corp. Shareholder Derivative Litig., Lead Case No. 2015-CP-46-2225 in the Court of Common Pleas for the 16th Judicial Circuit, County of York, South Carolina. Gee and Lu were consolidated into one action styled as Gee v. Hull, et al., Case No. BC610319 in the Superior Court for the State of California, County of Los Angeles. Nally, Foster, Howes, and Ameduri were consolidated into one action in the United States District Court for the District of South Carolina with Nally as the lead consolidated case.The derivative complaints allege claims for breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment and seek, among other things, monetary damages and certain corporate governance actions.All of the derivative complaints listed above have been stayed until the earlier of the close of discovery or the deadline for appealing a dismissal in the KBC Asset Management NV securities class action.The Company believes the claims alleged in the putative securities class action and the derivative lawsuits are without merit and intends to defend the Company and its officers and directors vigorously.15Ronald Barranco and Print3D Corporation v. 3D Systems Corporation, et. al.On August 23, 2013, Ronald Barranco, a former Company employee, filed two lawsuits against the Company and certain officers in the United States District Court for the District of Hawaii. The first lawsuit (“Barranco I”) is captioned Ronald Barranco and Print3D Corporation v. 3D Systems Corporation, 3D Systems, Inc., and Damon Gregoire,, Case No. CV 13-411 LEK RLP, and alleges seven causes of action relating to the Company’s acquisition of Print3D Corporation (of which Mr. Barranco was a 50% shareholder) and the subsequent employment of Mr. Barranco by the Company. The second lawsuit (“Barranco II”) is captionedRonald Barranco v. 3D Systems Corporation, 3D Systems, Inc., Abraham Reichental, and Damon Gregoire,, Case No. CV 13-412 LEK RLP, and alleges the same seven causes of action relating to the Company’s acquisition of certain website domains from Mr. Barranco and the subsequent employment of Mr. Barranco by the Company. Both Barranco I and Barranco II allege the Company breached certain purchase agreements in order to avoid paying Mr. Barranco additional monies pursuant to royalty and earn out provisions in the agreements. The Company and its officers timely filed responsive pleadings on October 22, 2013 seeking, inter alia,, to dismiss Barranco I due to a mandatory arbitration agreement and for lack of personal jurisdiction and to dismiss Barranco II for lack of personal jurisdiction.With regard to Barranco I, the Hawaii district court, on February 28, 2014, denied the Company’s motion to dismiss and its motion to transfer venue to South Carolina for the convenience of the parties. However, the Hawaii court recognized that the plaintiff’s claims are all subject to mandatory and binding arbitration in Charlotte, North Carolina. Because the Hawaii court was without authority to compel arbitration outside of Hawaii, the court ordered that the case be transferred to the district court encompassing Charlotte (the United States District Court for the Western District of North Carolina) so that court could compel arbitration in Charlotte. On April 17, 2014, Barranco I was transferred in to the United States District Court for the Western District of North Carolina. Plaintiff filed a demand for arbitration on October 29, 2014. On December 9, 2014, the Company filed its answer to plaintiff’s demand for arbitration. On February 2, 2015, plaintiff filed an amended demand that removed Mr. Gregoire as a defendant from the matter, and on February 4, 2015 the Company filed its amended answer. The parties selected an arbitrator and arbitration took place in JuneSeptember 2015 in Charlotte, North Carolina.On September 28, 2015, the arbitrator issued a final award in favor of Mr. Barranco with respect to two alleged breaches of contract and implied covenants arising out of the contract. The arbitrator found that the Company did not commit fraud or make any negligent misrepresentations to Mr. Barranco. Pursuant to the award, the Company is to pay approximately $11,282, which includes alleged actual damages of $7,254, fees and expenses of $2,318 and prejudgment interest of $1,710. The Company disagrees with the single arbitrator’s findings and conclusions and believes the arbitrator’s decision exceeds his authority and disregards the applicable law. As an initial response, the Company filed a motion for modification on September 30, 2015, based on mathematical errors in the computation of damages and fees. On October 16, 2015, the arbitrator issued an order denying the Company’s motion and sua sponte issuing a modified final award in favor of Mr. Barranco in the same above-referenced amounts, but making certain substantive changes to the award, which changes the Company believes were improper and outside the scope of his authority and the American Arbitration Association rules. On November 20, 2015, the Company filed a motion to vacate the arbitration award in the federal court in the United States District Court for the Western District of North Carolina. Claimants also filed a motion to confirm the arbitration award. A hearing was held on the motions on JuneSeptember 29, 2016 in federal court in the Western District of North Carolina. The court requested supplemental briefing by the parties, which briefs were filed on July 11, 2016.On August 31, 2016, the court issued an Orderorder granting in part and denying in part Plaintiff’s motion to confirm the arbitration award and for judgment, entering judgment in the principal amount of the arbitration award and denying Plaintiff’s motion for fees and costs. The court denied the Company’s motion to vacate. On September 7, 2016, Plaintiff filed a motion to amend the judgment to include prejudgment interest. The Company opposed that motion and the parties submitted briefing, which is currently pending before the court.briefing. On September 28, 2016 the Company filed a motion to alter or amend the judgment. Plaintiff opposed the motion and the parties submitted briefing, whichbriefing. On May 18, 2017, the court issued an opinion and order denying the Company’s motion to alter or amend and denying Plaintiff’s motion for prejudgment interest. On September 16, 2017, the Company filed a notice of appeal with the United States Court of Appeals for the Fourth Circuit. The appeal is currently pending beforepending. The Company filed its Opening Brief and the court.Notwithstanding the Company’s right to appeal, given the arbitrator’s decision, the Company recorded an $11,282 expense provision for this matter in the quarter ended September 30, 2015. The provision is subject to adjustment based on the ultimate outcome of the Company’s appeal. If it is ultimately determined that money is owed following the full appellate process in federal court, the Company intends to fund any amounts to be paid from cash on hand. This amount has been classified as a long-termcurrent liability given the customary timeline of anthe appeals process. The Company will review this classification periodically.16With regard to Barranco II, the Hawaii district court, on March 17, 2014, denied the Company’s motion to dismiss and its motion to transfer venue to South Carolina. However, the Hawaii court dismissed Count II in plaintiff’s complaint alleging breach of the employment agreement. The Company filed an answer to the complaint in the Hawaii district court on March 31, 2014. On November 19, 2014, the Company filed a motion for summary judgment on all claims which was heard on January 20, 2015. On January 30, 2015, the court entered an order granting in part and denying in Partpart the Company’s motion for summary judgment. The Order narrowed the plaintiff’s claim for breach of contract and dismissed the plaintiff’s claims for fraud and negligent misrepresentation. As a result, Messrs. Reichental and Gregoire were dismissed from the lawsuit. The case was tried to a jury in May 2016, and on May 27, 2016 the jury found that the Company was not liable for either breach of contract or breach of the implied covenant of good faith and fair dealing. Additionally, the jury found in favor of the Company on its counterclaim againstMr. Barranco and determined that Mr. Barranco violated his non-competition covenant with the Company. The Court is expected to order an accountingOn July 5, 2017, the court ordered a bench trial regarding causation and damages with respect to the counterclaim.Export Compliance MatterIn October 2017 the Company received an administrative subpoena from the Bureau of Industry and Security of the Department of Commerce (“BIS”) requesting the production of records in connection with possible violations of U.S. export control laws, including with regard to its Quickparts.com, Inc. subsidiary. In addition, while collecting information responsive to the above-referenced subpoena, the Company identified potential violations of the International Traffic in Arms Regulations (“ITAR”) administered by the Directorate of Defense Trade Controls of the Department of State (“DDTC”) and potential violations of the Export Administration Regulations administered by the Bureau of Industry and Security of the Department of Commerce. On February 12, 2018, the Company submitted an initial notice of voluntary disclosure to DDTC in which the Company identified certain potentially unauthorized exports of technical data. The Company is involved in various other legal matters incidentalcontinuing to its business. Althoughconduct an internal review and cooperating fully with the Companyinvestigation, but cannot predict the resultsultimate resolution of litigationthis matter. The Company expects to incur significant legal costs and other expenses in connection with certainty,responding to these inquiries.If the U.S. government finds that the Company believeshas violated one or more export control laws or trade sanctions, the Company could be subject to various penalties. By statute, these penalties can include but are not limited to fines, which by statute may be significant, denial of export privileges, and debarment from participation in U.S. government contracts; and any assessment of penalties could also harm the Company’s reputation, create negative investor sentiment, and affect the Company’s share value. In connection with any resolution, the Company may also be required to undertake additional remedial compliance measures and program monitoring. The Company cannot at this time predict when BIS and/or DDTC will conclude their investigations or determine an estimated cost, if any, or range of costs, for any penalties or fines that the dispositionmay be incurred upon resolution of these legal matters will not have a material adverse effect on its consolidated results of operations or consolidated financial position.IndemnificationIn the normal course of business, the Company periodically enters into agreements to indemnify customers or suppliers against claims of intellectual property infringement made by third parties arising from the use of the Company’s products. Historically, costs related to these indemnification provisions have not been significant, and the Company is unable to estimate the maximum potential impact of these indemnification provisions on its future results of operations.To the extent permitted under Delaware law, the Company indemnifies its directors and officers for certain events or occurrences while the director or officer is, or was, serving at the Company’s request in such capacity, subject to limited exceptions. The maximum potential amount of future payments the Company could be required to make under these indemnification obligations is unlimited; however, the Company has directors and officers insurance coverage that may enable the Company to recover future amounts paid, subject to a deductible and the policy limits. There is no assurance that the policy limits will be sufficient to cover all damages, if any.(15)any.(14) Accumulated Other Comprehensive LossThe changes in the balances of accumulated other comprehensive loss by component are as follows:(50,450) (2,775) (53,225) 8,331 20 8,351 (42,119) (2,755) (44,874) (in thousands) Foreign currency translation adjustment Defined benefit pension plan Liquidation of non-US entity and purchase of non-controlling interests Total Balance at December 31, 2017 $ (19,319 ) $ (2,555 ) $ 338 $ (21,536 ) Other comprehensive income (loss) 7,416 (17 ) — 7,399 Balance at March 31, 2018 $ (11,903 ) $ (2,572 ) $ 338 $ (14,137 ) The amounts presented above are included in other comprehensive income (loss)loss and are net of taxes. For additional information about foreign currency translation, see Note 7.(16)6.(15) Noncontrolling InterestsAs of March 31, 2017,2018, the Company owned approximately 70% of the capital and voting rights of Robtec, a service bureau and distributor of 3D printing and scanning products.products in Brazil. Robtec was acquired on November 25, 2014.As of March 31, 2017,2018, the Company owned approximately 65%70% of the capital and voting rights of Easyway, a service bureau and distributor of 3D printing and scanning products in China. Approximately 65% of the capital and voting rights of Easyway waswere acquired on April 2, 2016.2015, and an additional 5% of the capital and voting rights of Easyway were acquired on July 19, 2017 for $2.3 million.This discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Item 1 (the “Financial Statements”) of this Quarterly Report on Form 10-Q (“Form 10-Q”). We are subject to a number of risks and uncertainties that may affect our future performance that are discussed in greater detail in the sections entitled “Forward-Looking Statements” at the end of this Item 2 and that are discussed or referred to in Item 1A of Part II of this Form 10-Q.17Business Overview3D Systems Corporation (“3D Systems” or the “Company” or “we” or “us”) is a holding company incorporated in Delaware in 1993 that operatesmarkets our products and services through subsidiaries in North America and South America (collectively referred to as “Americas”), Europe and the Middle East (collectively referred to as “EMEA”) and the Asia Pacific region (“APAC”). We market our products and services in those areas as well as in other parts of the world. We provide comprehensive 3D printing solutions, including 3D printers, print materials, software, on-demandon demand manufacturing services and digital design tools. Our solutions support advanced applications in a wide range of industries and key verticals including healthcare, aerospace, automotive and durable goods. Our precision healthcare capabilities include simulation, Virtual Surgical Planning (“VSP™”), and printing of medical and dental devices, andmodels, surgical guides and instruments. Our solutions support advanced applications in a wide range of industries including healthcare, aerospace, automotive and durable goods. 3D Systems has a 30 year history of experience and expertise which have proven vital to our development of an ecosystem that enablesand end-to-end digital workflow which enable customers to optimize product designs, transform workflows, bring innovative products to market and drive new business models.Customers can use our 3D printing solutions to design and manufacture complex and unique parts, eliminate expensive tooling, produce parts locally or in small batches and reduce lead times and time to market. A growing number of customers are shifting from prototyping applications to also using 3D printing for production. We believe this shift will be further driven by our continued advancement and innovation of 3D printing solutions that improve durability, repeatability, productivity and total cost of operations.Recent DevelopmentsOn January 31, 2017, we announced the acquisition of Vertex-Global Holding B.V. (“Vertex”), a provider of dental materials worldwide under the Vertex and NextDent brands. Vertex Dental and NextDent are manufacturers of photopolymer, thermoplastic, polymer and monomer materials for traditional and 3D printing dental applications. NextDent has developed 12 dental 3D printing materials to date and has obtained regulatory approval for use of these materials in more than 70 countries worldwide. NextDent’s portfolio of 3D printing materials allow dental professionals to produce trays, models, drilling templates, dentures, orthodontic splints, crowns and bridges with enhanced speed, precision and efficiency and lower cost compared to conventional procedures. We believe together, our Figure 4 platform and NextDent’s advanced 3D printing materials provide a strategic foothold in the multi-billion-dollar digital dentistry opportunity and will deliver materials innovation, regulatory compliance, manufacturing efficiency and vertical solutions expertise to advance our solutions across healthcare and other verticals.Summary of 2017First Quarter2018 Financial ResultsTotal consolidated revenue for the quarter ended March 31, 20172018 increased by 2.6%6.0%, or $3.9$9.5 million, to $156.4$165.9 million, compared to $152.6$156.4 million for the quarter ended March 31, 2016.2017. These results reflect an increase in materialsprinters, healthcare and services revenue, partially offset by a decrease in productssoftware revenue as well as favorable foreign currency impact, as discussed further discussed below.Healthcare revenue includes sales of products, materials and services for healthcare-related applications, including simulation, training, and planning, 3D printing of anatomical models, surgical guides and instruments and medical and dental devices. For the quarter ended March 31, 2017,2018, healthcare revenue increased by 29.0%21.4%, to $43.2$52.4 million, and made up 27.6%31.6% of total revenue, compared to $33.5$43.2 million, or 21.9%27.6% of total revenue, for the quarter ended March 31, 2016.2017. The increase in healthcare revenue reflects increased products and services sales that wereis driven by customers increasing their investmentsgrowth in products, including printers and expanding their capabilities in precision healthcare, coupled with the acquisition of Vertex.For the quarter ended March 31, 2017,2018, total software revenue from products and services increased by 0.5%,12.9% to $20.4$23.0 million, and made up 13.0%13.9% of total revenue, compared to $20.3$20.4 million, or 13.3%13.0% of total revenue for the quarter ended March 31, 2016.As of March 31, 2017 and December 31, 2016, our backlog was $34.6 million and $31.7 million, respectively. Production and delivery of our printers is generally not characterized by long lead times; backlog is more dependent on timing of customers’ requested deliveries. In addition, on-demand parts services lead time and backlog depends on whether orders are for rapid prototyping or longer-range production runs. As of March 31, 2017, backlog included $8.7 million of on-demand parts manufacturing service orders, compared to $9.2 million at December 31, 2016.Gross profit for the quarter ended March 31, 2017 increased2018 decreased by 3.4%2.9%, or $2.7$2.3 million, to $80.2$77.9 million, compared to $77.5$80.2 million for the quarter ended March 31, 2016.2017. Gross profit margin for the quarters ended March 31, 2018 and 2017 was 46.9% and 2016 was 51.3% and 50.8%, respectively. Our shift away from lower margin consumer products combined with cost reduction efforts drove higher gross profit and margin.Operating expenses for the quarter ended March 31, 2017 decreased2018 increased by 5.3%6.9%, or $5.0$6.1 million, to $89.3$95.4 million, compared to $94.3$89.3 million for the quarter ended March 31, 2016. These results primarily reflect lower selling,2017. Selling, general and administrative expense, partially offsetexpenses for the quarter ended March 31, 2018 increased by higher4.7%, or $3.1 million, to $69.5 million, compared to $66.4 million for the quarter ended March 31, 2017, predominantly due to our ongoing investment in go-to-market and IT infrastructure. Research and development expenses for the quarter ended March 31, 2018 increased by 13.3%, or $3.0 million, to $25.9 million, compared to $22.9 million for the quarter ended March 31, 2017, predominantly due to increased research and development, expense, as further discussed below.including investments to support our planned 2018 product launches.18Our operating loss for the quarter ended March 31, 20172018 was $9.1$17.5 million, compared to an operating loss of $16.8$9.1 million for the quarter ended March 31, 2016, reflecting higher gross profit and lower operating expenses, as further discussed below.For the quarters ended March 31, 2018 and 2017, we used $1.5 million and 2016, we generated $19.4 million and $18.1 million of cash infrom operations, respectively, as further discussed below. In total, our unrestricted cash balance at March 31, 20172018 and December 31, 20162017, was $161.7$121.6 million and $184.9$136.3 million, respectively.Results of Operations – Quarter ComparisonFirst quarter comparison of revenue by geographic regionThe following table sets forth the change in revenue by geographic region for the quarters ended March 31, 2018 and 2017.Table 1(Dollars in thousands) Americas EMEA Asia Pacific Total Revenue — first quarter 2017 $ 80,291 51.3 % $ 52,958 33.9 % $ 23,182 14.8 % $ 156,431 100.0 % Change in revenue: Volume 6,631 8.3 % (511 ) (1.0 )% 873 3.8 % 6,993 4.5 % Price/Mix (2,386 ) (3.0 )% (1,949 ) (3.7 )% (1,402 ) (6.0 )% (5,737 ) (3.7 )% Foreign currency translation 11 — % 6,918 13.1 % 1,272 5.5 % 8,201 5.2 % Net change 4,256 5.3 % 4,458 8.4 % 743 3.3 % 9,457 6.0 % Revenue — first quarter 2018 $ 84,547 51.0 % $ 57,416 34.6 % $ 23,925 14.4 % $ 165,888 100.0 % Consolidated revenue increased 6.0%, predominantly driven by higher sales volumes in the Americas and APAC regions and the favorable impact of foreign currency in the EMEA and APAC regions, offset by a shift in product mix and average selling price across all geographic regions. The increase in sales volume is due to demand from healthcare and industrial customers. The shift in product mix and average selling price across all geographic regions relates to sales of printer models which carry lower price points.For the quarters ended March 31, 2018 and 2017, revenue from operations outside the U.S., including Latin America, EMEA and APAC, was 50.1% and 50.2% of total revenue, respectively.Comparison of revenue by classWe earn revenuesrevenue from the sale of products, materials and services. The products category includes 3D printers, healthcare simulators and digitizers, as well as software licenses, 3D scanners and haptic devices. The materials category includes a wide range of print materials to be used with our 3D printers, the majority of which are proprietary.proprietary, as well as acquired conventional dental materials. The services category includes warrantymaintenance contracts and maintenanceservices on 3D printers and simulators, software maintenance, on-demandon demand manufacturing solutions and healthcare services. Due to the relatively high price of certain 3D printers and a corresponding lengthy selling cycle and relatively low unit volume of the higher priced printers in any particular period, a shift in the timing and concentration of orders and shipments from one period to another can affect reported revenue in any given period. Revenue reported in any particular period is also affected by timing of revenue recognition under rules prescribed by U.S. generally accepted accounting principles (“GAAP”).In addition to changes in sales volumes includingand the impact of revenue from acquisitions, there are two other primary drivers of changes in revenue from one period to another: (1) the combined effect of changes in product mix and average selling prices, sometimes referred to as price and mix effects, and (2) the impact of fluctuations in foreign currencies. As used in this Management’s Discussion and Analysis, the price and mix effects relate to changes in revenue that are not able to be specifically related to changes in unit volume.Table 1The following table sets forth the change in revenue by class for the quarters ended March 31, 20172018 and 2016:2017.TableTable 152,495 34.4 38,469 25.2 61,591 40.4 152,555 100 435 0.8 6,813 17.7 975 1.6 8,223 5.4 (424) (0.8) (1,564) (4.1) (1,988) (1.3) (599) (1.1) (895) (2.3) (865) (1.4) (2,359) (1.5) (588) (1.1) 4,354 11.3 110 0.2 3,876 2.6 51,907 33.2 42,823 27.4 61,701 39.4 156,431 100 Total consolidated(Dollars in thousands) Products Materials Services Total Revenue — first quarter 2017 $ 54,216 34.6 % $ 42,823 27.4 % $ 59,392 38.0 % $ 156,431 100.0 % Change in revenue: Volume 8,120 15.0 % 292 0.7 % (1,419 ) (2.4 )% 6,993 4.5 % Price/Mix (2,718 ) (5.0 )% (3,019 ) (7.0 )% — — % (5,737 ) (3.7 )% Foreign currency translation 3,011 5.6 % 2,400 5.6 % 2,790 4.7 % 8,201 5.2 % Net change 8,413 15.6 % (327 ) (0.7 )% 1,371 2.3 % 9,457 6.0 % Revenue — first quarter 2018 $ 62,629 37.8 % $ 42,496 25.6 % $ 60,763 36.6 % $ 165,888 100.0 % Consolidated revenue increased by 2.6%6.0%, primarilypredominantly driven by products revenue and the favorable impact of foreign currency translation, partially offset by a shift in product mix which impacted average selling price for both products and materials.Products revenue increased due to higher demand from healthcare revenue coupled withand industrial customers as well as the acquisitionfavorable impact of Vertex.2016, software$31.4 million, respectively. Software revenue included in the products category, including scanners and haptic devices, contributed $12.3 million and $9.8 million. The increasemillion for the quarters ended March 31, 2018 and 2017, respectively.Materials revenue remained relatively flat as the favorable impact of foreign currency was offset by changes in materialsproduct mix and average selling prices.Services revenue primarily reflects increased demand for materials driven by industrial customers with production printers, coupled withdue to the acquisitionfavorable impact of Vertex.The increase in services revenue reflects increased demand for healthcare services and our expanded software offering, which wereforeign currency translation, partially offset by a decrease in on-demand parts manufacturing services. For the quarter ended March 31, 2017, services revenue from on-demand parts manufacturing services decreased 6.2% to $25.1 million, compared to $26.8 for quarter ended March 31, 2016.lower sales volume. For the quarters ended March 31, 2018 and 2017, and 2016, softwarerevenue from on demand manufacturing services contributed $10.6$25.7 million and $10.5$25.1 million, respectively.19First quarter comparison of revenue by geographic regionTable 2 sets forth the change in revenue by geographic region for the quarters ended March 31, 2017 and 2016:Table 283,490 54.7 47,431 31.1 21,634 14.2 152,555 100 (1,512) (1.8) 5,937 12.5 3,798 17.6 8,223 5.4 (1,864) (2.2) 1,866 3.9 (1,990) (9.2) (1,988) (1.3) 177 0.2 (2,276) (4.8) (260) (1.2) (2,359) (1.5) (3,199) (3.8) 5,527 11.6 1,548 7.2 3,876 2.6 80,291 51.3 52,958 33.9 23,182 14.8 156,431 100 The decrease in revenue in the Americas region primarily reflects lower sales of 3D printers and on-demand parts manufacturing services, partially offset by increased healthcare-related solutions. The increase in revenue in the EMEA and Asia Pacific regions primarily reflects increased sales of materials, coupled with the acquisition of Vertex.2016, revenue from operations outside the U.S., including Latin America, EMEA and APAC, was 50.2% and 49.8% of total revenue,$10.6 million, respectively.Gross profit and gross profit marginsTable 3The following table sets forth gross profit and gross profit margins for the quarters ended March 31, 20172018 and 2016:Table 318,293 35.2 16,805 32.0 1,488 8.9 3.2 10.1 31,689 74.0 29,998 78.0 1,691 5.6 (4.0) (5.1) 30,204 49.0 30,710 49.9 (506) (1.6) (0.9) (1.9) 80,186 51.3 77,513 50.8 2,673 3.4 0.5 0.9 Quarter Ended March 31, 2018 2017 Change in Gross Profit Change in Gross Profit Margin (Dollars in thousands) Gross Profit Gross Profit Margin Gross Profit Gross Profit Margin $ % Percentage Points % Products 18,319 29.3 % 18,093 33.4 % 226 1.2 % (4.1 ) (12.2 )% Materials 31,713 74.6 % 31,689 74.0 % 24 0.1 % 0.6 0.8 % Services 27,850 45.8 % 30,404 51.2 % (2,554 ) (8.4 )% (5.4 ) (10.5 )% Total $ 77,882 46.9 % $ 80,186 51.3 % $ (2,304 ) (2.9 )% (4.4 ) (8.5 )% The increasedecrease in total consolidated gross profit is primarily driven by higher products and materials gross profit, as further discussed below.Gross profit margin for products increased, primarily due to cost reduction measuresmix of sales, particularly in printers, and a favorable impact to sales mix from our shift away from lower margin consumer products.Gross profit margin for materials decreased, primarily due to an unfavorable impact of mix.Gross profit margin for services decreased, primarily driven by lower field service margins, partially offset by increased on-demand parts manufacturing services margins. On-demand partshigher costs in on demand manufacturing.On demand manufacturing services gross profit margin increaseddecreased to 42.5%38.8% for the quarter ended March 31, 2017,2018 compared to 41.8%43.3% for the quarter ended March 31, 2016.2017.20Operating expensesTable 4The following table sets forth the components of operating expenses for the quarters ended March 31, 20172018 and 2016:Table 466,405 42.5 73,967 48.5 (7,562) (10.2) 22,852 14.6 20,305 13.3 2,547 12.5 89,257 57.1 94,272 61.8 (5,015) (5.3) Quarter Ended March 31, 2018 2017 Change (Dollars in thousands) Amount % Revenue Amount % Revenue $ % Selling, general and administrative expenses 69,497 41.9 % 66,405 42.5 % 3,092 4.7 % Research and development expenses 25,883 15.6 % 22,852 14.6 % 3,031 13.3 % Total operating expenses $ 95,380 57.5 % $ 89,257 57.1 % $ 6,123 6.9 % Total operating expenses decreased, reflecting lowerincreased for the quarter ended March 31, 2018 as compared to the quarter ended March 31, 2017 due to both increased selling, general and administrative expenses partially offset by higherand research and development expenses, as discussed below.Selling,expenses. The increase in selling, general and administrative expenses decreasedis primarily due to increased marketing and advertising, the implementation of a $5.5 million decrease in compensation costs driven by lower stock based compensationmarket-based job architecture and higher bad debt expense and $2.2 million decrease in bad debt expense.duein support of the new products we plan to a $1.4 million increasebring to market throughout 2018 and focused innovation to drive customers’ shift to 3D production, including investment in compensation costs related to increased staffing, a $0.6 million increase in outside services associated with product developmentplastics, metals, materials and a $0.4 million increase in materials purchases.Loss from operationsTable 5The following table sets forth operating income (loss)loss from operations by geographic region for the quarters ended March 31, 20172018 and 2016:Table 5(13,450) (14,186) 2,057 1,011 (1,524) (8,118) 4,341 5,182 (8,576) (16,111) (495) (648) (9,071) (16,759) Quarter Ended March 31, (Dollars in thousands) 2018 2017 Loss from operations: Americas (18,924 ) (13,450 ) EMEA (2,005 ) 533 Asia Pacific 3,974 4,341 Subtotal (16,955 ) (8,576 ) Intercompany elimination (543 ) (495 ) Total $ (17,498 ) $ (9,071 ) The improvementincrease in operating loss for the quarter ended March 31, 2018 compared to the quarter ended March 31, 2017 was primarily driven by lowera decrease in gross profit and an increase in operating expenses. See “Comparison of revenue by geographic region,” “Gross profit and gross profit margins” and “Operating expenses” above.Interest and other income, netThe following table sets forth the components of interest and other (expense) income, net, for the quarters ended March 31, 2018 and 2017.Table 6 Quarter Ended March 31, (Dollars in thousands) 2018 2017 Interest and other (expense) income, net: Interest income 222 167 Foreign exchange gain 61 329 Interest expense (228 ) (230 ) Other expense, net (1,580 ) (65 ) Total interest and other (expense) income, net$ (1,525 ) $ 201 The increase in interest and other (expense) income, net, related to a $1.4 million adjustment to the fair value of certain cost method investments in the first quarter of 2018.Net loss attributable to 3D SystemsThe following table sets forth the primary components of net loss attributable to 3D Systems for the quarters ended March 31, 2018 and 2017.Table7 Quarter Ended March 31, (Dollars in thousands) 2018 2017 Change Operating loss $ (17,498 ) $ (9,071 ) $ (8,427 ) Other non-operating items: Interest and other (expense) income, net (1,525 ) 201 (1,726 ) Provision for income taxes (1,954 ) (1,041 ) (913 ) Net loss (20,977 ) (9,911 ) (11,066 ) Less: net (loss) income attributable to noncontrolling interests (16 ) 60 (76 ) Net loss attributable to 3D Systems $ (20,961 ) $ (9,971 ) $ (10,990 ) Net income (loss) per share - basic and diluted $ (0.19 ) $ (0.09 ) The increase in net loss for the quarter ended March 31, 2018 as compared to the quarter ended March 31, 2017 was primarily driven by a decrease in gross profit and an increase in operating expenses. See “Gross profit and gross profit margins” and “Operating expenses” above.With respect to the Americas, for the quarters ended March 31, 2017 and 2016, the changes in operating loss reflected the same factors relating to our consolidated operating loss that are discussed above. The changes in operating loss in our operations outside the Americas for the quarters ended March 31, 2017 and 2016 resulted primarily from transfer pricing, changes in sales volume and foreign currency translation. 21Interest and other income, netTable 6 sets forth the components of interest and other income, net, for the quarters ended March 31, 2017 and 2016:Table 6(167) (216) (329) (1,518) 230 420 65 1,188 (201) (126) Provision for income taxesFor the quarters ended March 31, 2017 and 2016, we recorded a $1.0 million and $1.2 million provision for income taxes, respectively. Net lossTable 7 sets forth the primary components of net loss attributable to 3D Systems for the quarters ended March 31, 2017 and 2016:Table 7(9,071) (16,759) 7,688 (201) (126) (75) 1,041 1,179 (138) 60 (24) 84 (9,971) (17,788) 7,817 (0.09) (0.16) 22Table8161,662 184,947 (23,285) (12.6) 136,005 140,034 (4,029) (2.9) (11,424) (12,920) 1,496 (11.6) 124,581 127,114 (2,533) (2.0) 44,828 45,122 (294) (0.7) 4,143 3,109 1,034 33.3 68,340 69,870 (1,530) (2.2) 117,311 118,101 (790) (0.7) (12,206) (14,770) 2,564 (17.4) 105,105 103,331 1,774 1.7 17,909 17,558 351 2.0 409,257 432,950 (23,693) (5.5) 584 572 12 2.1 40,752 40,514 238 0.6 48,736 49,968 (1,232) (2.5) 6,549 5,857 692 11.8 45,079 33,494 11,585 34.6 141,700 130,405 11,295 8.7 267,557 302,545 (34,988) (11.6) 637,504 629,873 7,631 1.2 Change (Dollars in thousands) March 31, 2018 December 31, 2017 $ % Cash and cash equivalents $ 121,607 $ 136,344 $ (14,737 ) (10.8 )% Accounts receivable, net 134,470 129,879 4,591 3.5 % Inventories 110,383 103,903 6,480 6.2 % 366,460 370,126 (3,666 ) Less: Current portion of capitalized lease obligations 661 644 17 2.6 % Accounts payable 55,405 55,607 (202 ) (0.4 )% Accrued and other liabilities 66,442 65,899 543 0.8 % 122,508 122,150 358 Operating working capital $ 243,952 $ 247,976 $ (4,024 ) (1.6 )% We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. In doing so, we review and analyze our current cash on hand, the number of days our sales are outstanding, inventory turns, capital expenditure commitments and accounts payable turns. Our cash requirements primarily consist of funding of working capital and funding of capital expenditures.We believe our existing cash and cash equivalents will be sufficient to satisfy our working capital needs, capital expenditures, outstanding commitments and other liquidity requirements associated with our existing operations in the foreseeable future, or to consummate significant acquisitions of other businesses, assets, products or technologies. However, it is possible that, in the future, we may need to raise additional funds to finance our activities. If needed, we may be able to raise such funds by issuing equity or debt securities to the public or selected investors, by borrowing from financial institutions, drawing down on our credit facility, or selling assets or restructuring debt. There is no assurance, however, that funds will be available from these sources in the amounts or on terms acceptable to us.If we need to raise additional funds in the future to fund our activities, or for other reasons, and raise additional funds by issuing equity or convertible debt securities, the ownership percentages of existing shareholders would be diluted. In addition, the equity or debt securities that we may issue may have rights, preferences or privileges senior to those of our common stock.Cash held outside the U.S. at March 31, 20172018 was $87.0$89.4 million, or 53.8%73.6% of total cash and equivalents, compared to $83.5$88.9 million, or 45.2%65.2% of total cash and equivalents at December 31, 2016. Cash held outside2017. As our previously unremitted earnings have been subjected to U.S. federal income tax, we expect any repatriation of these earnings to the U.S. is used inwould not incur significant additional taxes related to such amounts. However, our foreign operations for working capital purposesestimates are provisional and is consideredsubject to be permanently invested; consequently, we have not provided for any taxes on repatriation. compriseare comprised of funds held in money market instruments and are reported at their current carrying value, which approximates fair value due to the short term nature of these instruments. We strive to minimize our credit risk by investing primarily in investment grade, liquid instruments and limit exposure to any one issuer depending upon credit quality. See “Cash flow”, “Credit facilities” and “Capitalized lease obligations” below.Days’ sales outstanding was 72 days at March 31, 20172018 compared to 7073 days at December 31, 2016 and2017 while accounts receivable more than 90 days past due decreasedincreased to 9.8%9.4% of gross receivables at March 31, 2018, from 12.5%9.1% at December 31, 2016.2017. We review specific receivables periodically to determine the appropriate reserve for accounts receivable.23The majority of our inventory consists of finished goods, including products, materials and service parts. Inventory also consists of raw materials and spare parts for the in-house assembly and support service products. We outsource the assembly of certain 3D printers; therefore, we generally do not hold most parts for the assembly of these printers in inventory.The changes that make up the other components of working capital not discussed above arose inresulted from the ordinary course of business. Differences between the amounts of working capital item changes in the cash flow statement and the balance sheet changes for the corresponding items are primarily the result of foreign currency translation adjustments.Cash flowTable 9 summarizes theThe following tables set forth components of cash provided by (used in) operating activities, investing activities and financing activities, as well as the effect of changes in foreign currency exchange rates on cash,flow for the quarters ended March 31, 20172018 and 2016:Table919,381 18,118 (40,167) (4,477) (4,436) (1,072) 1,937 1,562 (23,285) 14,131 Three Months Ended March 31, (Dollars in thousands) 2018 2017 Net cash (used in) provided by operating activities $ (1,539 ) $ 19,388 Net cash used in investing activities (10,994 ) (40,167 ) Net cash used in financing activities (3,640 ) (4,414 ) Effect of exchange rate changes on cash 1,438 1,926 Net decrease in cash, cash equivalents and restricted cash $ (14,735 ) $ (23,267 ) Cash flow from operationsTable 10 Three Months Ended March 31, (Dollars in thousands) 2018 2017 Net loss $ (20,977 ) $ (9,911 ) Non-cash charges 23,844 21,243 Changes in working capital and all other operating assets (4,406 ) 8,056 Net cash (used in) provided by operating activities $ (1,539 ) $ 19,388 Cash used in operating activitiesWorking capital requirements used cash of $4.4 million for the quarter ended March 31, 2018 and provided $8.1 million for the quarter ended March 31, 2017. In the quarter ended March 31, 2018, cash outflows resulting from increases in accounts receivable, inventory and other current assets were partially offset by an increase in deferred revenues. In the quarter ended March 31, 2017, cash inflows were driven by lower accounts receivable balances combined with an increase in deferred revenues and were partially offset by other working capital items.Cash flow from investing activitiesTable 10 summarizes the components11 Three Months Ended March 31, (Dollars in thousands) 2018 2017 Purchases of property and equipment $ (10,764 ) $ (5,620 ) Additions to license and patent costs (230 ) (280 ) Cash paid for acquisitions, net of cash assumed — (34,291 ) Other investing activities — 24 Net cash used in investing activities $ (10,994 ) $ (40,167 ) The primary outflow of cash provided by operatingrelates to investments in property, plant and equipment as we invest in infrastructure, add to our on-demand manufacturing service and equip facilities for new product development efforts. In 2017 we acquired Vertex for an aggregate purchase price of $34.3 million, net of cash acquired.Cash flow from financing activitiesTable 12 Three Months Ended March 31, (Dollars in thousands) 2018 2017 Payments on earnout consideration $ (2,675 ) $ (3,206 ) Payments related to net-share settlement of stock-based compensation (837 ) (1,088 ) Repayment of capital lease obligations (128 ) (120 ) Net cash used in financing activities $ (3,640 ) $ (4,414 ) Cash used in financing activities was $3.6 million and $4.4 million for the quarters ended March 31, 2018 and 2017, respectively. The primary outflows of cash relate to payments on earnout provisions related to one of our acquisitions and 2016:Table 10(9,911) (17,812) 21,190 28,052 8,102 7,878 19,381 18,118 For further discussionthe settlement of net loss, see “Net loss” above. Non-cash charges primarily consist of depreciation, amortization and stock-based compensation.For further discussion of changes in working capital, see “Liquidity and Capital Resources” above. Differences betweenWe may issue additional securities from time to time as necessary to provide flexibility to execute our growth strategy. No securities were issued during the amounts of working capital item changes in the cash flow statement and the balance sheet changes for the corresponding items are primarily the result of foreign currency translation adjustments.Cash flow from investing activitiesTable 11 summarizes the components of cash used in investing activities for the quartersquarter ended March 31, 20172018 and 2016:Table 11(34,291) (5,620) (4,246) 24 (280) (231) (40,167) (4,477) 24See Note 2 to the condensed consolidated financial statements for further discussion of acquisition activity. Capital expenditures primarily consisted of expenditures for leasehold improvements, including expanding facilities and investing in infrastructure, equipment to support our on-demand parts manufacturing service and printers associated with new product development efforts. Cash flow from financing activitiesTable 12 summarizes the components of cash used in financing activities for the quarters ended March 31, 2017 and 2016:Table 12(3,206) (1,088) (810) (142) (262) (4,436) (1,072)
Other contractual arrangements
We lease certain of our facilities and equipment under non-cancelable operating leases. For the quarters ended March 31, 2017 and 2016, rent expense under operating leases was $3.7 million and $3.3 million, respectively.
Certain of our acquisition purchase agreements contain earnout payment provisions under which the sellers of the acquired businesses can earn additional amounts. The total amount of liabilities recorded for these earnouts is $7.9 million and $10.8 million at March 31, 2017 and December 31, 2016, respectively.
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Financial instruments
We conduct business in various countries using both the functional currencies
We do not hedge for trading or speculative purposes, and our foreign currency contracts are generally short-term in nature, typically maturing in 90 days or less. We have elected not to prepare and maintain the documentation to qualify for hedge accounting treatment under ASC 815, “Derivatives and Hedging,” and therefore, we recognize all gains and losses (realized or unrealized) in interest and other expense, net in our Consolidated Statements of Operations and Other Comprehensive Income (Loss).
Changes in the fair value of derivatives are recorded in interest and other expense, net, in our unaudited condensed consolidated statements of operations and comprehensive income. Depending on their fair value at the endPresentation of the reporting period, derivatives are recorded either in prepaid and other current assets or in accrued liabilities in our unaudited condensed consolidated balance sheets.
Recent Accounting Pronouncements
Our critical accounting policies are disclosed in our 2016 Annual Report on Form 10-K and NoteNotes to Financial Statements (Part I, Item 1 of our condensed consolidated financial statements. The only change to our critical accounting policies during the quarter ended March 31, 2017 was a modification to the way in which we accountthis Form 10-Q) for forfeitures of share-based awards. Specifically, beginning in the first quarter of 2017, we recognize forfeitures of share-based awards as they occur in the period of forfeiture rather than estimating the number of awards expected to be forfeited at the grant date and subsequently adjusting the estimate when awards are actually forfeited. This change did not have a material impact on our results of operations in the current period, and is not expected to have a material impact on results of operations in subsequent periods
further discussion.
For
on March 14, 2018, that have had a material impact on our condensed consolidated financial statements and related notes.
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2017. PART II — OTHER INFORMATIONItem 3. Quantitative and Qualitative Disclosures about Market Risk.For a discussion of market risks at December 31, 2016,2017, refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” in our Form 10-K. During the first quarter of 2017,2018, there were no material changes or developments that would materially alter the market risk assessment performed as of December 31, 2016.Evaluation of disclosure controls and proceduresAs of March 31, 2017,2018, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) pursuant to Rules 13a-15 and 15d-15 under the Exchange Act. These controls and procedures were designed to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, in a manner to allow timely decisions regarding required disclosures. Based on this evaluation, including an evaluation of the rules referred to above in this Item 4, management has concluded that our disclosure controls and procedures were effective as of March 31, 20172018 to provide reasonable assurance that the information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, in a manner to allow timely decisions regarding required disclosures.Changes in Internal Controls over Financial ReportingThere were no material changes in our internal controls over financial reporting during the period covered by this Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reportingreporting.27
Total number of shares (or units) purchased Average price paid per share (or unit) Total number of shares (or units) purchased as part of publicly announced plans or programs Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs January 1, 2017 - January 31, 2017 $ — $ — February 1, 2017 - February 28, 2017 — — March 1, 2017 - March 31, 2017 — — Total (a) $ (b) — $ — Reflects shares of common stock surrendered to the Company for payment of tax withholding obligations in connection with the vesting of restricted stock. The average price paid reflects the average market value of shares withheld for tax purposes. 3.1 Certificate of Incorporation of Registrant. (Incorporated by reference to Exhibit 3.1 to Form 8-B filed on August 16, 1993, and the amendment thereto, filed on Form 8-B/A on February 4, 1994.) 3.2 Amendment to Certificate of Incorporation filed on May 23, 1995. (Incorporated by reference to Exhibit 3.2 to Registrant’s Registration Statement on Form S-2/A, filed on May 25, 1995.) 3.3 31.2 32.1 32.2 101.INS XBRL Instance Document. 101.SCH XBRL Taxonomy Extension Schema Document. 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB XBRL Taxonomy Extension Label Linkbase Document. 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. By /s/ John N. McMullen John N. McMullen (duly authorized officer)Item 1. Legal Proceedings.The information set forth in “Litigation” in Note 1413 – Commitments and Contingencies to the Financial Statements in Part I, Item 1 of this Form 10-Q is incorporated herein by reference.Item 1A. Risk Factors.There have been no material changes from the risk factors as previously disclosed in our Form 10-K.Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.Recent Issuances of Unregistered SecuritiesOn January 31, 2017, as part of the consideration for the acquisition of certain assets of Vertex-Global Holding B.V. (“Vertex”), we issued 191,533 unregistered shares of 3D Systems Corporation common stock to Vertex, in reliance on the private offering exemptions contained in Section 4(2) of the Securities Act of 1933, as amended. The fair value of the consideration paid for this acquisition, net of cash acquired, was $37,499,328, of which $34,291,128 was paid in cash and $3,208,200 was paid in unregistered shares of the Company’s common stock.None.Issuer Purchases of Equity SecuritiesWe did not repurchase any of our equity securities during the quarter ended March 31, 2017,2018, except for unvested restricted stock awards repurchased or forfeited pursuant to our 2004 and 2015 Incentive Stock Plans.31,761 13.69 35,710 16.61 2,285 14.49 69,756 14.93 Total number of shares (or units) purchased Average price paid per share (or unit) Total number of shares (or units) purchased as part of publicly announced plans or programs Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs January 1, 2018 - January 31, 2018 12,433 9.69 — — February 1, 2018 - February 28, 2018 98,456 9.11 — — March 1, 2018 - March 31, 2018 3,966 11.51 — — 114,855 (a) 9.26 (b) — — (a) (b) Item 6. Exhibits.Certificate of Designation of Rights, Preferences and Privileges of Preferred Stock. (Incorporated by reference to Exhibit 2 to Registrant’s Registration Statement on Form 8-A filed on January 8, 1996.)3.4Certificate of Designation of the Series B Convertible Preferred Stock, filed with the Secretary of State of Delaware on May 2, 2003. (Incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K, filed on May 7, 2003.)3.5Certificate of Elimination of Series A Preferred Stock filed with the Secretary of State of Delaware on March 4, 2004. (Incorporated by reference to Exhibit 3.6 of Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 15, 2004.)283.6Certificate of Elimination of Series B Preferred Stock filed with the Secretary of State of Delaware on September 9, 2006. (Incorporated by reference to Exhibit 3.1 of Registrant’s Current Report on Form 8-K, filed on September 9, 2006.)3.73.83.93.10Certificate of Designations, Preferences and Rights of Series A Preferred Stock, filed with the Secretary of State of Delaware on December 9, 2008. (Incorporated by reference to Exhibit 3.1 of Registrant’s Current Report on Form 8-K, filed on December 9, 2008.)3. 11Certificate of Elimination of Series A Preferred Stock, filed with the Secretary of State of Delaware on November 14, 2013. (Incorporated by reference to Exhibit 3.1 of Registrant’s Current Report on Form 8-K, filed on November 15, 2013.)3.123.1331.131.1 * Management contract or compensatory plan or arrangement29SIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.3D Systems Corporation ExecutiveVice President and Chief Financial Officer(principal financialand accounting officer)Date: May 3, 20172, 20183034