| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2017
March 31, 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) September 30, December 31, ASSETS Current assets: Cash and cash equivalents $ $ Accounts receivable, net of reserves — $11,607 (2017) and $12,920 (2016) Inventories 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 115,798 (2017) and 115,113 (2016) Additional paid-in capital Treasury stock, at cost — 1,982 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 September 30, Nine Months Ended September 30, (in thousands, except per share amounts) 2017 2016 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 expense, net Loss before income taxes Provision (benefit) 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 3D Systems Corporation common stockholders - basic and diluted $ $ $ $ Other comprehensive income: 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 (loss) attributable to noncontrolling interests Comprehensive loss attributable to 3D Systems Corporation $ $ $ $ Nine Months Ended September 30, (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 Lower of cost or market adjustment Provision for bad debts Provision for (benefit of) deferred income taxes Impairment of assets 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 Other investing activities Proceeds from disposition of property and equipment — Net cash used in investing activities Cash flows from financing activities: Payments on earnout consideration — Payments related to net-share settlement of stock-based compensation Repayment of capital lease obligations Net cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Net (decrease) increase 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 Deficit Accumulated Other Comprehensive 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 — — — — — — Purchase of subsidiary shares from — — — — — Cumulative impact of change — — — — — — — — Stock-based compensation expense — — — — — — — Net income (loss) — — — — — — Pension adjustment — — — — — — — Foreign currency translation adjustment — — — — — — Balance at September 30, 2017 $ $ $ $ $ $ $ $ Common Stock Treasury Stock (In thousands, except par value) Shares Par Value $0.001 Additional Paid In Capital Shares Amount Accumulated Deficit Accumulated Other Comprehensive Loss Total 3D Systems Corporation Stockholders' Equity Equity Attributable to Noncontrolling Interests Total Stockholders' Equity Balance at December 31, 2015 $ $ $ $ $ $ $ $ Issuance (repurchase) of stock — �� — — Stock-based compensation expense — — — — — — — Net loss — — — — — — Pension adjustment — — — — — — — Foreign currency translation adjustment — — — — — — Balance at September 30, 2016 $ $ $ $ $ $ $ $ NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Standards administrative expenses. (in thousands) 2017 2016 Raw materials $ $ Work in process Finished goods and parts Inventories $ $ (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: Customer relationships $ $ $ $ $ $ 1-14 6 Acquired technology 1-16 4 Trade names 1-8 5 Patent costs 1-20 9 Trade secrets 7 4 Acquired patents 1-6 4 Other 2-4 2 Total intangible assets $ $ $ $ $ $ 1-20 4 (in thousands) 2017 2016 Compensation and benefits $ $ Arbitration award — Accrued taxes Vendor accruals Accrued earnouts related to acquisitions Accrued other Royalties payable Accrued professional fees Accrued interest Total $ $ (in thousands) 2017 2016 Long term employee indemnity $ $ Arbitration award — Defined benefit pension obligation Other long term liabilities Long term tax liability Long term deferred revenue Long term earnouts related to acquisitions Total $ $ not material. March 31, 2018. Quarter Ended September 30, Nine Months Ended September 30, (Dollars in thousands) 2017 2016 2017 2016 Service cost $ $ $ $ Interest cost Amortization of actuarial loss Total periodic cost $ $ $ $ Quarter Ended September 30, Nine Months Ended September 30, (in thousands, except per share amounts) 2017 2016 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 September 30, 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 March 31, 2018. would not be expected to incur significant additional taxes related to such amounts. Quarter Ended September 30, Nine Months Ended September 30, (in thousands) 2017 2016 2017 2016 Revenue from unaffiliated customers: United States $ $ $ $ Other Americas Germany Other EMEA Asia Pacific Total revenue $ $ $ $ Quarter Ended September 30, Nine Months Ended September 30, (in thousands) 2017 2016 2017 2016 Revenue by class of product and service: Products $ $ $ $ Materials Services Total revenue $ $ $ $ Quarter Ended September 30, 2017 Intercompany Sales to (in thousands) Americas Germany Other EMEA Asia Pacific Total Americas $ $ $ $ $ Germany — Other EMEA Asia Pacific — Total intercompany sales $ $ $ $ $ Quarter Ended September 30, 2016 Intercompany Sales to (in thousands) Americas Germany Other EMEA Asia Pacific Total Americas $ $ $ $ $ Germany — Other EMEA Asia Pacific — Total intercompany sales $ $ $ $ $ Nine Months Ended September 30, 2017 Intercompany Sales to (in thousands) Americas Germany Other EMEA Asia Pacific Total Americas $ $ $ $ $ Germany — Other EMEA Asia Pacific — Total intercompany sales $ $ $ $ $ Nine Months Ended September 30, 2016 Intercompany Sales to (in thousands) Americas Germany Other EMEA Asia Pacific Total Americas $ $ $ $ $ Germany — Other EMEA Asia Pacific — Total intercompany sales $ $ $ $ $ Quarter Ended September 30, Nine Months Ended September 30, (in thousands) 2017 2016 2017 2016 Loss from operations: Americas $ $ $ $ Germany Other EMEA Asia Pacific Subtotal Intercompany elimination 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. The court ordered the submission of proposed findings of fact and conclusions of law. The Company these inquiries. (in thousands) Foreign currency translation adjustment Defined benefit pension plan Total Balance at December 31, 2016 $ $ $ Other comprehensive income (loss) Balance at September 30, 2017 $ $ $ materials. March 31, 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 – third quarter 2016 $ % $ % $ % $ % Change in revenue: Volume Price/Mix — — Foreign currency translation Net change Revenue – third quarter 2017 $ % $ % $ % $ % currency translation, partially offset by a shift in product mix which impacted average selling price for both products and materials. mix and average selling prices. (Dollars in thousands) Products Materials Services Totals Revenue – nine months 2016 $ % $ % $ % $ % Change in revenue: Volume Price/Mix — — Foreign currency translation Net change Revenue – nine months 2017 $ % $ % $ % $ % (Dollars in thousands) Americas EMEA Asia Pacific Total Revenue – third quarter 2016 $ % $ % $ % $ % Change in revenue: Volume Price/Mix Foreign currency translation Net change Revenue – third quarter 2017 $ % $ % $ % $ % (Dollars in thousands) Americas EMEA Asia Pacific Total Revenue – nine months 2016 $ % $ % $ % $ % Change in revenue: Volume Price/Mix Foreign currency translation Net change Revenue – nine months 2017 $ % $ % $ % $ % Gross profit and gross profit margins 2017. Quarter Ended September 30, 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 $ % $ % $ % % Nine Months Ended September 30, 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 $ % $ % $ % % March 31, 2017. 2017. Quarter Ended September 30, 2017 2016 Change (Dollars in thousands) Amount % Revenue Amount % Revenue $ % Selling, general and administrative expenses $ % $ % $ % Research and development expenses Total operating expenses $ % $ % $ % Nine Months Ended September 30, 2017 2016 Change (Dollars in thousands) Amount % Revenue Amount % Revenue $ % Selling, general and administrative expenses $ % $ % $ % Research and development expenses Total operating expenses $ % $ % $ % Quarter Ended September 30, Nine Months Ended September 30, (in thousands) 2017 2016 2017 2016 Income (loss) from operations: Americas $ $ $ $ EMEA Asia Pacific Subtotal Intercompany elimination Total $ $ $ $ Quarter Ended September 30, Nine Months Ended September 30, (Dollars in thousands) 2017 2016 2017 2016 Interest and other expense, net: Interest income $ $ $ $ Foreign exchange (gain) loss Interest expense Other (income) expense, net Total interest and other income, net $ $ $ $ Quarter Ended September 30, (Dollars in thousands) 2017 2016 Change Operating loss $ $ $ Less: Interest and other expense, 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 $ $ Nine Months Ended September 30, (Dollars in thousands) 2017 2016 Change Operating loss $ $ $ Less: Interest and other expense, 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 $ $ Change (Dollars in thousands) September 30, 2017 December 31, 2016 $ % Cash and cash equivalents $ $ $ % Accounts receivable, net Inventories Current portion of capitalized lease obligations Accounts payable Accrued and other liabilities Operating working capital $ $ $ % Cash held outside the U.S. at PART I — FINANCIAL INFORMATIONItem 1. Financial Statements.3D SYSTEMS CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS
2017
(unaudited)
2016138,332 184,947 122,420 127,114 100,578 103,331 21,344 17,558 382,674 432,950 91,473 79,978 106,632 121,501 227,820 181,230 5,173 8,123 27,602 25,371 841,374 849,153 632 572 46,388 40,514 55,866 49,968 5,249 5,857 37,311 33,494 145,446 130,405 7,230 7,587 16,644 17,601 48,529 57,988 217,849 213,581 8,872 8,872 115 115 1,320,074 1,307,428 (7,153) (2,658) (667,638) (621,787) (27,706) (53,225) 617,692 629,873 (3,039) (3,173) 614,653 626,700 841,374 849,153 (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 LOSS(Unaudited)87,626 94,543 276,777 280,406 65,281 61,819 192,028 186,622 152,907 156,362 468,805 467,028 59,467 56,321 150,769 146,682 34,918 31,104 98,655 93,485 94,385 87,425 249,424 240,167 58,522 68,937 219,381 226,861 66,497 64,814 195,990 202,009 24,360 26,140 71,661 67,345 90,857 90,954 267,651 269,354 (32,335) (22,017) (48,270) (42,493) (1,257) (1,624) (123) (1,290) (33,592) (23,641) (48,393) (43,783) 3,723 (2,214) 6,831 665 (37,315) (21,427) (55,224) (44,448) 355 (214) 833 (799) (37,670) (21,213) (56,057) (43,649) (0.34) (0.19) (0.50) (0.39) (24) 18 (105) 54 4,904 4,282 25,785 5,567 4,880 4,300 25,680 5,621 26 22 161 68 4,854 4,278 25,519 5,553 (32,435) (17,127) (29,544) (38,827) 381 (192) 994 (731) (32,816) (16,935) (30,538) (38,096) 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)(55,224) (44,448) 46,146 45,731 21,084 28,405 12,883 10,723 1,297 1,488 1,674 (5,464) 324 8,590 10,777 36,357 (13,959) (26,236) (2,939) (1,619) 3,463 (9,938) (4,734) (10,841) 2,869 1,763 (5,985) 3,729 17,676 38,240 (36,541) (21,072) (12,014) (875) (790) (2,350) (1,000) 271 (60,567) (13,804) (3,206) (4,494) (1,507) (297) (786) (7,997) (2,293) 4,273 1,572 (46,615) 23,715 184,947 155,643 138,332 179,358 378 633 4,715 8,040 8,964 9,395 364 349 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-demandon 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) 626,700 493 484 (4,495) (4,495) (4,495) 192 3,208 3,208 3,208
noncontrolling interest(1,440) 50 (1,390) (860) (2,250)
in accounting policy(10,206) 10,206 21,084 21,084 21,084 (56,057) (56,057) 833 (55,224) (105) (105) (105) 25,574 25,574 161 25,735 115,798 115 1,320,074 1,982 (7,153) (667,638) (27,706) 617,692 (3,039) 614,653 113,115 113 1,279,738 892 (1,026) (583,368) (39,548) 655,909 (1,263) 654,646 1,186 1 (1,240) 438 (268) (1,507) (1,507) 28,405 28,405 28,405 (43,649) (43,649) (799) (44,448) 54 54 54 5,499 5,499 68 5,567 114,301 114 1,306,903 1,330 (1,294) (627,017) (33,995) 644,711 (1,994) 642,717 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 and nine months ended September 30, 2017March 31, 2018 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 May 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting” (“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 its consolidated financial statements.In 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 presentation of 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 adopted ASU 2017-07 in the first quarter of 2017,2018 and the implementation of this guidance did not have a material effect on its consolidated financial statements.On 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 Board (“FASB”)Issued But Not Yet AdoptedIn February 2018, the FASB issued ASU No. 2018-02, Accounting Standards Update (“ASU”)"Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" No. 2016-09, “Compensation – Stock Compensation (Topic 718)(ASU 2018-02), Improvementswhich provides companies with an option to Employee Share-Based Payment Accounting”.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 following summarizesCompany is currently in the effectsprocess of the adoptionevaluating when it will adopt ASU 2018-02 and its impact 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 no longer applies a forfeiture rate and instead accounts 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 were not 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 were not 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 were not adjusted. Recently Issued Accounting PronouncementsIn 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 May 2017, the FASB issued ASU No. 2017-09, “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting” (“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 conditions7of 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 will adopt ASU 2017-09 beginning January 1, 2018 and does not expect the implementation of this guidance to have a material effect on its consolidated financial statements.In 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 adopt ASU 2017-07 in the first quarter of 2018 and does not expect the implementation of this guidance to have a material effect 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 May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). The ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of the ASU to fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Companies may use either a full retrospective or a modified retrospective approach to adopt this ASU.The Company intends to use the modified retrospective method of adoption effective January 1, 2018, the cumulative effect of which would be recognized at the date of initial application with an adjustment to the opening balance of retained earnings. Under the modified retrospective approach, prior periods are not restated; however, it effectively requires a company to apply both the new revenue standard and the previous revenue guidance in the year of adoption. During the year of adoption, both quantitative and qualitative disclosures are required as to the impact of the new standard compared to the previous revenue guidance.The Company has performed an assessment of the impact that the new standard will have on its financial statements. The assessment included the identification of key revenue streams and a review of a sample contracts across the various businesses and geographies. The assessment also identified certain potential accounting differences that may arise from the application of the new standard. The8Company is in the process of evaluating its accounting policies related to the potential differences and expects to reach conclusions on new accounting policies or changes to existing accounting policies in the fourth quarter of 2017. Further, the Company has evaluated the impact of the new disclosure requirements, which are expected to be significant, specifically, disclosure of contract assets and contract liabilities as well as a disaggregated view of revenue. In addition, the Company has begun designing changes to business processes, systems and controls to support recognition and disclosure under the new standard, including the implementation of a revenue management system.While efforts are ongoing, the Company believes the most significant impacts relate to certain software revenues deferred under previous guidance that may be recognized earlier since revenue is allocated to performance obligations either based on observable inputs or estimated stand-alone selling price. No other new accounting pronouncements, issued or effective during 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 had no acquisition activity in the second or third quarters of 2017 or in fiscal year 2016.(3) InventoriesComponents of inventories, as of September 30, 2017net, at March 31, 2018 and December 31, 2016 were2017 are summarized as follows:39,402 38,383 3,822 3,109 57,354 61,839 100,578 103,331 During the quarter ended September 30, 2017 the Company recorded inventory adjustments totaling $12.9 million resulting from its lower of cost or market analysis. The charge was effected because of ongoing efforts to focus and prioritize the Company’s portfolio based on year-to-date demand, market trends and a better understanding of where the Company’s offerings meet and will continue to meet customers’ needs and demand. The inventory adjustments related primarily to legacy plastics printers, refurbished and used metals printers and parts which have shown little to no use over extended periods.9(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 September 30, 2017 and December 31, 2016 were as follows:903 903 11,276 11,122 128,614 108,682 8,809 8,651 4,606 3,130 30,043 24,423 349 144 10,947 7,760 195,547 164,815 (104,074) (84,837) 91,473 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.Depreciation expense on property and equipment was $6,497 and $18,767 for the quarter and nine months ended September 30, 2017, respectively, compared to $6,176 and $18,386 for the quarter and nine months ended September 30, 2016, respectively.(5) Intangible AssetsIntangible assets, net, other than goodwill, as of September 30, 2017at March 31, 2018 and December 31, 2016 were2017 are summarized as follows:106,674 (56,538) 50,136 99,067 (46,252) 52,815 55,148 (37,324) 17,824 52,881 (27,543) 25,338 27,764 (16,322) 11,442 28,110 (16,015) 12,095 17,135 (6,794) 10,341 16,263 (5,873) 10,390 19,443 (11,016) 8,427 19,134 (9,383) 9,751 16,655 (11,556) 5,099 16,965 (10,674) 6,291 25,683 (22,320) 3,363 23,431 (18,610) 4,821 268,502 (161,870) 106,632 255,851 (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 $8,845$8,067 and $26,661$8,832 for the quarterquarters ended March 31, 2018 and nine months ended September 30, 2017, respectively, compared to $8,857 and $26,536 for the quarter and nine months ended September 30, 2016, respectively.10(5) Accrued and Other LiabilitiesAccrued liabilities as of September 30, 2017at March 31, 2018 and December 31, 2016 were2017 are summarized as follows:19,075 22,771 11,282 9,106 9,831 7,297 8,231 3,971 3,238 2,726 2,956 1,707 2,092 664 810 38 39 55,866 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 of September 30, 2017at March 31, 2018 and December 31, 2016 were2017 are summarized as follows:13,646 11,152 11,282 8,576 7,613 7,775 5,726 7,124 7,183 7,062 7,464 4,346 7,568 48,529 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 expense, net” in the condensed consolidated statements of operations and comprehensive 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 $39,029$40,752 and $39,600 in notional foreign exchange contracts outstanding as of September 30,March 31, 2018 and December 31, 2017, for which therespectively. The fair value was not material. No foreign exchangevalues of these 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, 2018 and nine months ended September 30, 2017 and 2016.2017.11(7) BorrowingsCredit FacilityAs of September 30, 2017,March 31, 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 September 30, 2017March 31, 2018 and December 31, 2016.2017. There were no outstanding borrowings as of September 30, 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. The change in capitalized lease obligations, 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 loss for the quarters ended March 31, 2018 and nine months ended September 30, 2017 and 2016 were as follows:75 59 212 202 72 51 205 176 64 32 182 97 211 142 599 475 (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.(37,670) (21,213) (56,057) (43,649) 111,697 111,008 111,467 111,194 (0.34) (0.19) (0.50) (0.39) 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, 2018 and nine months ended September 30, 2017, and 2016, 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 5,145 weighted average shareswere 4,345 and 5,361 weighted average shares3,396 for the quarterquarters ended March 31, 2018 and nine months ended September 30, 2017, compared to 2,223 weighted average shares and 1,585 weighted average shares for the quarter and nine months ended September 30, 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:12Level 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:18,224 18,224 8,317 8,317 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 $717$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 or nine months ended September 30, 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 the Company’s Form 10-K.(12)(11) Income TaxesFor the quarterquarters ended March 31, 2018 and nine months ended September 30, 2017, the Company recorded provisionsexpense of $3,723$1,954 and $6,831,$1,041, respectively, resulting in effective tax rates of 11.1%10.3% and 14.1%11.7%, respectively. ForThe difference between the quarterstatutory rate and nine monthsthe 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 September 30, 2016,March 31, 2018 and 2017.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 limited to, a corporate tax rate decrease from 35% to 21% effective for tax 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 benefitmore detailed analysis of $2,214the Company’s deferred tax assets and a provisionliabilities and its historical foreign earnings as well as potential correlative adjustments. Any subsequent adjustment to these amounts will be recorded in the quarter of $665, respectively, resulting in effective tax rates of 9.4% and 1.5%, respectively.2018 when the analysis is complete.13The Company has not provided for any taxes onAs 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.Tax 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 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 (2015)(2014), France (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 Asia PacificAmericas region (Australia, China, India, Japan(United States, Canada, Brazil, Mexico and Korea)Uruguay), EMEA region (Belgium, France, Germany, Israel, Italy, the Netherlands, Switzerland and the United Kingdom), Latin America (Brazil, Mexico and Uruguay)Asia Pacific region (Australia, China, India, Japan and the United States.Korea). 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:75,402 84,768 234,195 246,150 3,534 2,122 8,300 7,831 20,761 16,796 60,908 56,225 31,696 26,948 97,956 83,704 21,514 25,728 67,446 73,118 152,907 156,362 468,805 467,028 48,227 56,484 150,681 163,301 39,399 38,059 126,096 117,105 65,281 61,819 192,028 186,622 152,907 156,362 468,805 467,028 554 9,439 2,325 5,390 17,708 945 1,645 259 2,849 15,112 2,006 635 726 18,479 613 8 772 1,393 17,224 11,445 4,613 7,147 40,429 733 6,163 2,244 6,322 15,462 240 976 105 1,321 14,972 562 1,236 1,053 17,823 606 113 1,053 1,772 16,551 6,725 4,569 8,533 36,378 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 $ 156,431 141,452 27,147 7,267 14,243 50,109 1,434 5,347 261 7,042 49,327 3,951 3,716 2,639 59,633 1,492 165 2,921 4,578 53,705 31,098 16,495 20,064 121,362 2,011 21,377 8,313 15,882 47,583 3,604 2,254 169 6,027 44,946 1,740 3,601 3,301 53,588 2,270 132 2,859 5,261 52,831 23,117 14,300 22,211 112,459 (34,255) (21,525) (63,344) (40,458) 193 2,761 1,978 7,732 (1,775) (11,043) 481 (27,225) 3,891 8,434 14,064 19,537 (31,946) (21,373) (46,821) (40,414) (389) (644) (1,449) (2,079) (32,335) (22,017) (48,270) (42,493) 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 quarterquarters ended March 31, 2018 and nine months ended September 30, 2017, rent expense under operating leases was $4,009$4,267 and $11,461, respectively, compared to $3,542 and $9,717 for the quarter and nine months ended September 30, 2016,$3,682, respectively.Certain of the Company’s acquisition agreements contain earnout provisions under which the sellers of the acquired businesses can earn additional amounts. The total liability recorded for these earnouts at September 30, 2017March 31, 2018 and December 31, 20162017 was $8,317$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.Management estimates, assuming that the subsidiary owned by the Company at September 30, 2017,March 31, 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 Consolidated Balance Sheet at September 30, 2017March 31, 2018 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.15LitigationSecurities 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.Ronald 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.16With 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 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 September 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 September 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 order 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. On September 28, 2016 the Company filed a motion to alter or amend the judgment. Plaintiff opposed the motion and the parties submitted briefing. 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 pending. The Company filed its Opening Brief and the 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.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 current liability given the timeline of the appeals process.With 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 part 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. On July 5, 2017, the court ordered a bench trial regarding causation and damages with respect to the equitable accounting on the Company’s prevailing counterclaim against Mr. Barranco. The bench trial has been set fortook place on November 20, 2017.is involved in various other legal matters incidentalsubmitted 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 its business. Althoughdisgorge, and the Company cannot predictto recover, $522.9, representing all but four months of the results of litigationfull amount paid to Barranco as salary during his employment with certainty, the Company believesas 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 the disposition of all current legal matters will not have a material adverse effect on its consolidated results of operations, consolidated statement of cash flows or consolidated financial position.17Export 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 continuing to conduct an internal review and cooperating fully with the investigation, but cannot predict itsthe ultimate resolution.resolution of this matter. The Company expects to incur significant legal costs and other expenses in connection with responding to the investigation.If the U.S. government finds that the Company has 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 its investigationtheir investigations or determine an estimated cost, if any, or range of costs, for any penalties or fines that may be incurred upon resolution of this matter.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)(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) 25,624 (105) 25,519 (24,826) (2,880) (27,706) (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 in other comprehensive loss and are net of taxes. For additional information about foreign currency translation, see Note 7.(16)6.(15) Noncontrolling InterestsAs of September 30, 2017,March 31, 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 in Brazil. Robtec was acquired on November 25, 2014.As of September 30, 2017,March 31, 2018, the Company owned approximately 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 were acquired on April 2, 2015, and an additional 5% of the capital and voting rights of Easyway were acquired on July 19, 2017 for $2.3 million.18This 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.Business Overview3D Systems Corporation (“3D Systems” or the “Company” or “we” or “us”) is a holding company incorporated in Delaware in 1993 that markets 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 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. 3D Systems has a 30 year history ofOur 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 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.Summary of ThirdFirst Quarter 20172018 Financial ResultsTotal consolidated revenue for the quarter ended September 30, 2017 decreasedMarch 31, 2018 increased by 2.2%6.0%, or $3.5$9.5 million, to $152.9$165.9 million, compared to $156.4 million for the quarter ended September 30, 2016.March 31, 2017. These results reflect a decrease in products revenue, partially offset by an increase in materialsprinters, healthcare and servicessoftware 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 September 30, 2017,March 31, 2018, healthcare revenue increased by 9.7%21.4%, to $46.6$52.4 million, and made up 30.5%31.6% of total revenue, compared to $42.5$43.2 million, or 27.2%27.6% of total revenue, for the quarter ended September 30, 2016.March 31, 2017. The increase in healthcare revenue is driven by growth in materials sales,products, including the acquisition of Vertex,printers and services sales which include virtual surgical planning and contract manufacturing services.For the quarter ended September 30, 2017,March 31, 2018, total software revenue from products and services remained relatively flat at $21.3increased 12.9% to $23.0 million, and made up 14.0%13.9% of total revenue, compared to $21.4$20.4 million, or 13.7%13.0% of total revenue for the quarter ended September 30, 2016.As of September 30 and June 30, 2017, our backlog was $26.6 million and $32.4 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 manufacturing services lead time and backlog depends on whether orders are for rapid prototyping or longer-range production runs. As of September 30, 2017, backlog included $8.9 million of on-demand manufacturing service orders, compared to $9.6 million at June 30,March 31, 2017.Gross profit for the quarter ended September 30, 2017March 31, 2018 decreased by 15.1%2.9%, or $10.4$2.3 million, to $58.5$77.9 million, compared to $68.9$80.2 million for the quarter ended September 30, 2016.March 31, 2017. Gross profit margin for the quarters ended September 30,March 31, 2018 and 2017 was 46.9% and 2016 was 38.3% and 44.1%51.3%, respectively. Gross profit marginOperating expenses for the third quarter of 2017 and 2016 included charges of $12.9ended March 31, 2018 increased by 6.9%, or $6.1 million, and $10.7to $95.4 million, respectively, relatedcompared to the write-off of excess and obsolete inventory.Operating expenses remained relatively flat at $90.9$89.3 million for the quarter ended September 30, 2017 asMarch 31, 2017. Selling, general and administrative expenses for the quarter ended March 31, 2018 increased by 4.7%, or $3.1 million, to $69.5 million, compared to $91.0$66.4 million for the quarter ended September 30, 2016, including continued investmentsMarch 31, 2017, predominantly due to our ongoing investment in R&D, go to marketgo-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, including investments to support our planned 2018 product launches.Our operating loss for the quarter ended September 30, 2017March 31, 2018 was $32.3$17.5 million, compared to an operating loss of $22.0$9.1 million for the quarter ended September 30, 2016.For the nine monthsquarters ended September 30,March 31, 2018 and 2017, and 2016, we generated $17.7used $1.5 million and $38.2generated $19.4 million of cash from operations, respectively, as further discussed below. In total, our unrestricted cash balance at September 30, 2017March 31, 2018 and December 31, 20162017, was $138.3$121.6 million and $184.9$136.3 million, respectively. A key driver for the lower cash balance was the Company’s acquisition of Vertex Global (“Vertex”) for approximately $34.3 million.19Results of OperationsComparison 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 revenue 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, 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 and 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 1 and Table 2 below setThe following table sets forth the change in revenue by class for the quarterquarters ended March 31, 2018 and nine months ended September 30, 2017, respectively2017.Table:2Table 156,484 36.1 38,059 24.4 61,819 39.5 156,362 100 (6,019) (10.7) 3,740 9.8 2,548 4.1 269 0.1 (3,129) (5.5) (2,883) (7.6) (6,012) (3.8) 891 1.6 483 1.3 914 1.5 2,288 1.5 (8,257) (14.6) 1,340 3.5 3,462 5.6 (3,455) (2.2) 48,227 31.5 39,399 25.8 65,281 42.7 152,907 100 (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 decreased 2.2%increased 6.0%, predominantly driven by a decrease in products volume and a shift in product mix, partially offset by increased volumes in both materials and servicesrevenue and the favorable impact of foreign currency.Products revenue decreased becauseincreased due to higher demand from healthcare and industrial customers as well as the favorable impact of lower volumes andforeign currency, offset by changes in product mix andwhich impacted average selling prices including increased demand forfrom the shift to higher sales of lower priced printers and softer demand for simulators during the quarter.printers. For the quarters ended September 30,March 31, 2018 and 2017, and 2016, revenue from printers was $29.4contributed $39.1 million and $33.0$31.4 million, respectively. Software revenue included in the products category, including scanners and haptic devices, contributed $10.6$12.3 million and $10.8$9.8 million for the quarters ended September 30,March 31, 2018 and 2017, and 2016, respectively.The increase in materialsMaterials revenue primarily reflects higher demand from healthcare customers including thoseremained relatively flat as the favorable impact of Vertex and NextDent dental materials, both part of the first quarter 2017 Vertex acquisition. This increased demandforeign currency was partially offset by a decrease related to a shiftchanges in product mix.Services revenue increased due to higher demand for healthcare services and on-demand manufacturing services.the favorable impact of foreign currency translation, partially offset by lower sales volume. For the quarters ended September 30,March 31, 2018 and 2017, and 2016, revenue from on-demandon demand manufacturing services contributed $27.2$25.7 million and $26.5$25.1 million, respectively. For the quarters ended September 30,March 31, 2018 and 2017, and 2016, software services revenue remained relatively flat at $10.7contributed $10.8 million and $10.5$10.6 million, respectively.20Table 2163,301 35.0 117,105 25.1 186,622 39.9 467,028 100 (8,726) (5.3) 14,833 12.7 6,085 3.3 12,192 2.6 (4,165) (2.6) (4,794) (4.1) (8,959) (1.9) 271 0.2 (1,048) (0.9) (679) (0.4) (1,456) (0.3) (12,620) (7.7) 8,991 7.7 5,406 2.9 1,777 0.4 150,681 32.1 126,096 26.9 192,028 41.0 468,805 100 Total consolidated revenue remained relatively flat as increases in volume for materials and services were offset by a decrease in volume for products and a shift in product mix.Products revenue decreased due to lower printer volume and a shift in product mix and average selling prices. For the nine months ended September 30, 2017 and 2016, printer revenue contributed $88.5 million and $98.2 million, respectively. Software revenue included in the products category, including scanners and haptic devices, contributed $33.2 million and $31.7 million for the nine months ended September 30, 2017 and 2016, respectively.The increase in materials revenue primarily reflects higher demand from healthcare and industrial customers including those of Vertex and NextDent dental materials, both part of the first quarter 2017 Vertex acquisition, partially offset by decreases related to a shift in product mix and an unfavorable foreign currency impact.Services revenue increased due to higher demand for healthcare services, partially offset by a decrease in on-demand manufacturing services. For the nine months ended September 30, 2017 and 2016, revenue from on-demand manufacturing services contributed $78.1 million and $80.3 million, respectively. For the nine months ended September 30, 2017 and 2016, software services contributed $32.5 million and $31.9 million, respectively.Comparison of revenue by geographic regionTable 3 and Table 4 below set forth change in revenue by geographic area for the quarter and nine months ended September 30, 2017, respectively:Table 386,890 55.6 43,744 28.0 25,728 16.4 156,362 100 (4,905) (5.6) 7,958 18.2 (2,784) (10.8) 269 0.1 (3,160) (3.6) (1,727) (3.9) (1,125) (4.4) (6,012) (3.8) 111 0.1 2,482 5.7 (305) (1.2) 2,288 1.5 (7,954) (9.1) 8,713 20.0 (4,214) (16.4) (3,455) (2.2) 78,936 51.6 52,457 34.3 21,514 14.1 152,907 100 Lower sales volumes in the Americas and APAC as well as a shift in product mix and average selling prices across all geographic regions, offset by higher sales volume in EMEA and the favorable impact of foreign currency, primarily drive the decrease in consolidated revenue.The decrease in revenue in the Americas region primarily reflects lower sales volumes and a shift in product mix and average selling prices. The increase in revenue in the EMEA region primarily reflects higher sales volumes, primarily driven by printer sales, Vertex materials, and the favorable impact of foreign currency. These impacts are slightly offset by a shift in product mix and average selling prices. The decrease in revenue in the Asia Pacific region primarily reflects lower demand combined with a shift in product mix and average selling prices.For the quarters ended September 30, 2017 and 2016, revenue from operations outside the U.S., including Latin America, EMEA and APAC, was 50.7% and 45.8% of total revenue, respectively.21Table 4253,981 54.4 139,929 30.0 73,118 15.6 467,028 100 (7,018) (2.8) 20,442 14.6 (1,232) (1.7) 12,192 2.6 (4,870) (1.9) (661) (0.5) (3,428) (4.7) (8,959) (1.9) 402 0.2 (846) (0.6) (1,012) (1.4) (1,456) (0.3) (11,486) (4.5) 18,935 13.5 (5,672) (7.8) 1,777 0.4 242,495 51.7 158,864 33.9 67,446 14.4 468,805 100 Consolidated revenue remained relatively flat as increases in sales volume were offset by decreases related to shifts in product mix and average selling prices. The decrease in revenue in the Americas region primarily reflects lower sales volumes and a shift in product mix and average selling prices. The increase in revenue in the EMEA region reflects higher sales volumes, primarily driven by Vertex materials and printer sales, offset slightly by a shift in product mix and average selling prices. The decrease in revenue in the Asia Pacific region primarily reflects a shift in product mix and lower volumes.For the nine months ended September 30, 2017 and 2016, revenue from operations outside the U.S., including Latin America, EMEA and APAC, was 50.0% and 47.3% of total revenue, respectively.Table 5 and Table 6 below setThe following table sets forth gross profit and gross profit marginmargins for the quarters ended March 31, 2018 and nine months ended September 30, 2017 and 2016, respectively:Table 53(360) (0.7) 9,288 16.4 (9,648) (103.9) (17.1) (104.3) 28,519 72.4 28,934 76.0 (415) (1.4) (3.6) (4.7) 30,363 46.5 30,715 49.7 (352) (1.1) (3.2) (6.4) 58,522 38.3 68,937 44.1 (10,415) (15.1) (5.8) (13.2) 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 decrease in total consolidated gross profit is driven by changes in product mix. Also contributing to the decrease were the inventory adjustments totaling $12.9 million versus adjustments of $10.7 million in the same period of 2016. The 2017 inventory adjustment resulted from a comprehensive review of our portfolio and inventory during the quarter ended September 30, 2017. The 2017 inventory adjustment primarily related to legacy plastics printers, refurbished and used metals printers and parts that have shown little to no use over extended periods. The majority of this adjustment relates to the products category. Gross profit margin for materials decreased primarily due to the mix of sales, including the addition of Vertex traditional dental materials that carry lower margins. Gross profit margin for services decreased slightly, predominantly due to the decreaseparticularly in on-demand manufacturing services margin to 40.9% for the quarter ended September 30, 2017 as compared to 43.7% for the quarter ended September 30, 2016.Table 634,255 22.7 43,790 26.8 (9,535) (21.8) (4.1) (15.3) 91,753 72.8 89,934 76.8 1,819 2.0 (4.0) (5.2) 93,373 48.6 93,137 49.9 236 0.3 (1.3) (2.6) 219,381 46.8 226,861 48.6 (7,480) (3.3) (1.8) (3.7) 22The decrease in total consolidated gross profit is driven by changes in product mix. Also contributing to the decrease were the inventory adjustments totaling $12.9 million versus adjustments of $10.7 million in the same period of 2016. The 2017 inventory adjustment resulted from a comprehensive review of our portfolio and inventory during the quarter ended September 30, 2017. The 2017 inventory adjustment primarily related to legacy plastics printers, refurbished and used metals printers, and parts that have shown little to no use over extended periods. The majority of this adjustment relates to the products category. Gross profit margin for materials decreased primarily due to the mix of sales, including the addition of Vertex traditional dental materials that carry lower margins. Gross profit margin for services increased slightly, due to improvementshigher costs in healthcare and other services margins, offset by on-demandon demand manufacturing.On demand manufacturing services gross profit margin that decreased to 38.8% for the quarter ended March 31, 2018 compared to 43.3% for the nine monthsquarter ended September 30, 2017, compared to 44.1% for the nine months ended September 30, 2016.Operating expensesTable 7 and Table 8 below setThe following table sets forth the components of operating expenses for the quarters ended March 31, 2018 and nine months ended September 30, 2017 and 2016, respectively:Table 7466,497 43.5 64,814 41.5 1,683 2.6 24,360 15.9 26,140 16.7 (1,780) (6.8) 90,857 59.4 90,954 58.2 (97) (0.1) 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 remained relatively flatincreased for the quarter ended September 30, 2017March 31, 2018 as compared to the quarter ended September 30, 2016.March 31, 2017 due to both increased selling, general and administrative expenses and research and development expenses. The increase in selling, general and administrative expenses is primarily due to investment in go to marketincreased marketing and IT infrastructure, including additional talentadvertising, the implementation of a market-based job architecture and resources.higher bad debt expense and legal expenses. Research and development expenses excluding the $6.1 million impact of charges and write-offs in the prior year due to an updated strategy and project reprioritization, increased primarily duein support of the new products we plan to bring to market throughout 2018 and focused innovation to drive customers’ shift to 3D production, including investment in plastics, in particular our Figure 4 platform, metals, materials and software as well as additionalthe addition of talent and resources.Table 8195,990 41.8 202,009 43.3 (6,019) (3.0) 71,661 15.3 67,345 14.4 4,316 6.4 267,651 57.1 269,354 57.7 (1,703) (0.6) Total operating expenses decreased modestlyLoss from operationsThe following table sets forth loss from operations by geographic region for the nine monthsquarters ended September 30, 2017 asMarch 31, 2018 and 2017.Table 5 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 increase in operating loss for the quarter ended March 31, 2018 compared to the nine monthsquarter ended September 30, 2016, reflecting lower selling, general and administrative expenses, offset by higher research and development expenses. Selling, general and administrative expenses decreased largely due to lower stock compensation expense due to the impact of adopting a new accounting standard that allowed us to change our policy for accounting for award forfeitures. The increase in research and development expenses, excluding the $6.1 million impact from charges and write-offs in the prior year due to an updated strategy and project reprioritization,March 31, 2017 was primarily due to investments in plastics, in particular our Figure 4 platform, metals, materials and software as wells as additional talent and resources.23Loss from operationsTable 9 below sets forth operating loss by geographic area for the quarters and nine months ended September 30, 2017 and 2016, respectively:Table 9(34,255) (21,525) (63,344) (40,458) (1,582) (8,282) 2,459 (19,493) 3,891 8,434 14,064 19,537 (31,946) (21,373) (46,821) (40,414) (389) (644) (1,449) (2,079) (32,335) (22,017) (48,270) (42,493) The loss from operations increased $10.3 million and $5.8 million for the quarter and nine months ended September 30, 2017, respectively, when compared to the same periods at September 30, 2016. The operating loss changes were primarily driven by changesa decrease in gross profit and an increase in operating expenses. See “Gross“margins”margins” and “Operating expenses”“Operating expenses” above.With respect to the Americas, for the quarter and nine months ended September 30, 2017, as compared to the same periods of 2016, operating losses increased primarily due to the impact of inventory adjustments as described in Note 3 to the condensed consolidated financial statements and under Table 5 above. The Americas region also contains a significant portion of our corporate costs, which negatively impacts profitability compared to the other regions. Operating losses for the regions are also impacted by our transfer pricing policies on intercompany transactions between the regions.The improvements in operating results for the EMEA region in the quarter and nine months ended September 30, 2017, as compared to the same periods of 2016, primarily reflect increased revenue, including the contribution of the acquisition of Vertex.The decrease in income from operations in the Asia Pacific region for the quarter and nine months ended September 30, 2017, as compared to the same periods of 2016, reflects decreases in revenues.Interest and other income, netTable 10 belowThe following table sets forth the components of interest and other expense,(expense) income, net, for the quarters ended March 31, 2018 and nine months ended September 30, 20172017.Table 6 Quarter Ended March 31, (Dollars in thousands) 2018 2017 Interest and other (expense) income, net: Interest income 222 167 Foreign exchange gain 61 329 Interest expense (228 ) (230 ) Other expense, net (1,580 ) (65 ) Total interest and other (expense) income, net$ (1,525 ) $ 201 The increase in interest and 2016, respectively:Table 10(227) (153) (555) (600) 822 1,123 (712) (340) 237 272 699 1,053 425 382 691 1,177 1,257 1,624 123 1,290 Net lossTable 11 and Table 12 below set 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 nine months2017.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 September 30,March 31, 2018 as compared to the quarter ended March 31, 2017 was primarily driven by a decrease in gross profit and 2016, respectively:an increase in operating expenses. See “Gross profit and gross profit margins” and “Operating expenses” above.24Table 11(32,335) (22,017) (10,318) 1,257 1,624 (367) 3,723 (2,214) 5,937 355 (214) 569 (37,670) (21,213) (16,457) (0.34) (0.19) Table 12(48,270) (42,493) (5,777) 123 1,290 (1,167) 6,831 665 6,166 833 (799) 1,632 (56,057) (43,649) (12,408) (0.50) (0.39) Liquidity and Capital ResourcesTable 138138,332 184,947 (46,615) (25.2) 122,420 127,114 (4,694) (3.7) 100,578 103,331 (2,753) (2.7) 361,330 415,392 (54,062) 632 572 60 10.5 46,388 40,514 5,874 14.5 55,866 49,968 5,898 11.8 102,886 91,054 11,832 258,444 324,338 (65,894) (20.3) 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.25September 30, 2017March 31, 2018 was $88.8$89.4 million, or 64.2%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.further analysis. Cash equivalents 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 “
Table 14 summarizes the
2017.
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, | ||||
|
| 2017 |
| 2016 | ||
(Dollars in thousands) |
|
|
|
|
|
|
Cash provided by operating activities |
| $ | 17,676 |
| $ | 38,240 |
Cash used in investing activities |
|
| (60,567) |
|
| (13,804) |
Cash used in financing activities |
|
| (7,997) |
|
| (2,293) |
Effect of exchange rate changes on cash |
|
| 4,273 |
|
| 1,572 |
Net increase (decrease) in cash and cash equivalents |
| $ | (46,615) |
| $ | 23,715 |
| | 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 | ) | |
| | 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 | ||
Table 15 summarizes for the components ofquarter ended March 31, 2018 was $1.5 million and cash providedgenerated by operating activities for the nine monthsquarter ended September 30, 2017 and 2016:
Table 15
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, | ||||
|
| 2017 |
| 2016 | ||
(Dollars in thousands) |
|
|
|
|
|
|
Net loss |
| $ | (55,224) |
| $ | (44,448) |
Non-cash charges |
|
| 83,408 |
|
| 89,473 |
Changes in working capital and all other operating assets |
|
| (10,508) |
|
| (6,785) |
Net cash provided by operating activities |
| $ | 17,676 |
| $ | 38,240 |
Net cash provided by operating activities for the nine months ended September 30,March 31, 2017 was $17.7$19.4 million. Excluding non-cash charges, net income provided $28.2cash of $2.9 million of cash.for the three months ended March 31, 2018 and $11.3 million for the three months ended March 31, 2017. Non-cash charges primarilygenerally consist of depreciation, amortization, and stock-based compensation and inventory adjustments. compensation.
26
the cash flow statement and the balance sheet changes for the corresponding items are primarily the result of foreign currency translation adjustments.
| 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 | ) | |
Table 16
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, | ||||
|
| 2017 |
| 2016 | ||
(Dollars in thousands) |
|
|
|
|
|
|
Cash paid for acquisitions, net of cash assumed |
| $ | (36,541) |
| $ | — |
Purchases of property and equipment |
|
| (21,072) |
|
| (12,014) |
Proceeds from disposition of property and equipment |
|
| 271 |
|
| — |
Other investing activities |
|
| (2,350) |
|
| (1,000) |
Additions to license and patent costs |
|
| (875) |
|
| (790) |
Net cash used in investing activities |
| $ | (60,567) |
| $ | (13,804) |
The primary outflows of cash relaterelates to the acquisition of Vertex, which we acquired for an aggregate purchase price of $34.3 million, net of cash acquired, and 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.
| 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 | ) | |
Table 17
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, | ||||
|
| 2017 |
| 2016 | ||
(Dollars in thousands) |
|
|
|
|
|
|
Payments on earnout consideration |
| $ | (3,206) |
| $ | — |
Payments related to net-share settlement of stock-based compensation |
|
| (4,494) |
|
| (1,507) |
Repayment of capital lease obligations |
|
| (297) |
|
| (786) |
Net cash used in financing activities |
| $ | (7,997) |
| $ | (2,293) |
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Critical Accounting Policies and Significant Estimates
Except as described below, there have been no material changes from the Critical Accounting Policies and Significant Estimates as previously disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Estimates” in our Form 10-K.
Contingencies
We account for contingencies in accordance with ASC 450, “Contingencies” (“ASC 450”). ASC 450 requires that we record an estimated loss from a loss contingency when information available prior to issuance of our financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of thecondensed consolidated financial statements and the amount of the loss can be reasonably estimated. Accounting for contingencies such as legal matters requires us to use our judgment. See Note 14 to the Financial Statements in Part I, Item 1 of this Form 10-Q and Note 22 to the consolidated financial statements in our Form 10-K.
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 nine monthsquarter 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 September 30, 2017,March 31, 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 September 30, 2017March 31, 2018 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.29
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 — — April 1, 2017 - April 30, 2017 — — May 1, 2017 - May 31, 2017 — — June 1, 2017 - June 30, 2017 — — July 1, 2016 - July 31, 2016 — — August 1, 2016 - August 31, 2016 — — September 1, 2016 - September 30, 2016 — — 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 3.4 3.5 3.7 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.Except as described below, thereThere have been no material changes from the risk factors as previously disclosed in our Form 10-K.We have added the following risk factor titled “Export Compliance Exposure”:Export Compliance ExposureIn 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. The Company is cooperating fully with the investigation, but cannot predict its ultimate resolution. The Company expects to incur significant legal costs and other expenses in connection with responding to the investigation.If the U.S. government finds that the Company has 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 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. The Company cannot at this time predict when BIS will conclude its investigation or determine an estimated cost, if any, or range of costs, for any penalties or fines that may be incurred upon resolution of this matter.Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.Recent Issuances of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesWe did not repurchase any of our equity securities during the quarter or nine months ended September 30, 2017,March 31, 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 20,369 14.87 17,777 21.65 9,229 20.67 13,687 17.13 127,259 17.08 12,970 12.93 271,047 16.57 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) 30Item 6. Exhibits.3.6 3.631.131.1 * Management contract or compensatory plan or arrangement31SIGNATUREPursuant 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: October 31, 2017May 2, 20183234