3D SYSTEMS CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of 3D Systems Corporation and

all majority-owned subsidiaries 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 parent. The Company includes noncontrolling interests as a component of total equity in the condensed consolidated balance sheets and the net income 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, ~~2017~~2018 (“2018 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~~June 30, ~~2018~~2019 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 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 Standards

~~In May 2017,~~On January 1, 2019, the ~~FASB issued~~Company adopted the Financial Accounting Standards Board ("FASB") ASU No. ~~2017-09,~~2016-02, “~~Compensation - Stock Compensation~~Leases (Topic ~~718): Scope~~842),” which requires the recognition of ~~Modification Accounting” (“ASU 2017-09”~~right-of-use ("ROU")~~, in an effort to reduce diversity~~ assets and ~~clarify what constitutes a modification, as it relates to~~related operating and finance lease liabilities on 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 of 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.balance sheet. The Company adopted ASU ~~2017-09 beginning~~2016-02 effective January 1, ~~2018 and~~2019 using the ~~implementation of this guidance did not have a material effect on its consolidated financial statements.~~

~~In March 2017,~~cumulative-effect adjustment transition method, which applies 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 presentationprovisions 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~~standard at the effective date without adjusting the comparative periods presented.

As permitted under ASU 2016-02, the Company applied practical expedients that allowed it to not (1) reassess historical lease classifications, (2) recognize short-term leases on the balance sheet, nor (3) separate lease and non-lease components for its real estate leases.

As a result of the adoption of ASU 2016-02 on January 1, 2019, the Company recorded operating lease liabilities and ROU assets of $38,415. The adoption of ASU 2016-02 had an immaterial impact on the Company's condensed consolidated statement of operations and condensed consolidated statement of cash flows 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 2018 and the implementation of this guidance did not have a material effect on its consolidated financial statements.six months ended June 30, 2019. For additional information about leases, see Note 3.

~~On January 1, 2018, the Company adopted Accounting Standards Codification ("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 modified retrospective 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 nine months 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 $327. On the Consolidated Balance Sheets, Other Assets would have been $466 lower, Deferred Revenues would have been $217 lower and the Accumulated Deficit would have increased by $249.

Accounting Standards Issued But Not Yet Adopted

In ~~February~~August 2018, the FASB issued ASU ~~No. 2018-02,~~ 2018-15, "~~Income Statement~~Intangibles - ~~Reporting Comprehensive Income (Topic 220): Reclassification~~Goodwill and Other - Internal-Use Software (Subtopic 350-40)," which aligns the requirements for capitalizing implementation costs incurred in a service contract hosting arrangement with those of ~~Certain Tax Effects from Accumulated Other Comprehensive Income"~~ (ASU 2018-02), which provides companies with an option to reclassify stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. ASU 2018-02developing or obtaining internal-use software. This standard is effective for ~~fiscal years~~interim and annual reporting periods beginning after December 15, ~~2018, with~~2019, and early adoption is permitted. The Company is ~~currently in~~evaluating the ~~process of evaluating when it~~impact the new standard will ~~adopt ASU 2018-02 and its impact~~have on its consolidated financial statements.

~~In August 2017, the FASB issued ASU No. 2017-12,~~ ~~“Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”~~ (“ASU 2017-12”), in order to create more transparency around how economic results are presented within both the financial statements and in the footnotes and to better align the results of cash flow and fair value hedge accounting with risk management activities. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently in the process of evaluating when it will adopt ASU 2017-12 and its impact on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”), which eliminates the performance of Step 2 from the goodwill impairment test. In performing its annual or interim impairment testing, an entity will instead compare the fair value of the reporting unit with its carrying amount and recognize any impairment charge for the amount by which the carrying amount exceeds the reporting unit’s

fair value. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss. The standard is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual impairment tests performed on testing dates after January 1, 2017. The Company has elected not to adopt the provisions of this standard early but will re-evaluate as part of performing its 2019 impairment analysis.

In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), which provides guidance regarding the measurement of credit losses for financial assets and certain other instruments that are not accounted for at fair value through net income, including trade and other receivables, debt securities, net investment in leases, and off-balance sheet credit exposures. The new guidance requires companies to replace the current incurred loss impairment methodology with a methodology that measures all expected credit losses for financial assets based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance expands the disclosure requirements regarding credit losses, including the credit loss methodology and credit quality indicators. In May 2019, the FASB issued ASU 2019-05, "Financial Instruments—Credit Losses (Topic 326)," which provides transition relief to entities adopting ASU 2016-13 by allowing entities to elect the fair value option on certain financial instruments. ASU 2016-13 will be effective for annual reporting periods, including interim reporting within those periods, beginning after December 15, 2019. Early adoption is ~~currently in~~permitted for annual reporting periods, including interim periods after December 15, 2018 and will be applied using a modified retrospective approach. The Company is evaluating the ~~process~~impact of ~~evaluating when it will adopt ASU 2017-04 and its impact~~adoption of this standard 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 on the balance sheet 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 on January 1, 2019, using a modified retrospective method of adoption. In August 2018, the FASB issued ASU 2018-11, “~~Targeted Improvements to ASC 842”,~~ ~~which includes an option to not restate comparative periods in transition and elect to use the effective date of ASC Topic 842, “Leases,"~~ as the date of initial application of transition. Based on the effective date, this guidance will apply and the Company will adopt this ASU beginning on January 1, 2019 and plans to elect the transition option provided under ASU 2018-11 and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company expects to apply the package of practical expedients that allows it to avoid the reassessment of: (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases. The Company also expects to use the practical expedient that allows it to treat the lease and non-lease components of its leases as a single component for its real estate leases. The Company is reviewing its population of leased assets to determine potential impacts on its consolidated financial statements. The Company is also in the process of evaluating adjustments to business processes, systems and controls to support lease accounting and disclosures under ASC Topic 842. Though its evaluation is ongoing, the Company expects a significant change to the balance sheet due to the recognition of right-of-use assets and lease liabilities primarily related to its real estate leases, but it does not anticipate material impacts to its results of operations or liquidity.

No other new accounting pronouncements, issued or effective during ~~2018,~~2019, have had or are expected to have a significant impact on the Company’s consolidated financial statements.

(2) Revenue

The 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 Obligations

A 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 ~~September~~June 30, ~~2018,~~2019, the Company had ~~$110,210~~$128,384 of outstanding performance obligations. The Company expects to recognize approximately 9193 percent of its remaining performance obligations as revenue within the next twelve months, an additional 3 percent by the end of ~~2019~~2020 and the balance thereafter.

Revenue Recognition

Revenue is recognized when control of the promised products or services is transferred to customers in an amount that reflects the consideration the Company expects 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~~stand-alone 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 received and revenue recognized may vary based on changes in marketing incentive programs offered to our customers. The Company's marketing incentive programs 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 services are delivered to customers. Please see below for further discussion.

Hardware and Materials

Revenue from hardware 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 printer or other hardware sales include 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.

Software

The Company also markets and sells software tools that enable our customers to capture and customize content using our printers, ~~as well as~~design optimization and simulation software, and reverse engineering and inspection software. Software does not require significant modification or customization and the license provides 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 post-sale support. Generally, the first year is included but 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.

Services

The Company offers training, installation and non-contract maintenance services for its products. Additionally, the Company offers maintenance contracts customers can purchase at their option. For maintenance contracts, revenue is deferred at the time of sale based on the stand-alone selling prices of these services and costs are expensed as incurred. Deferred revenue is recognized ratably over the term of the 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 sale

Shipping 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 product cost of sales.

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 provide payment terms that are customary in the countries where it transacts business. To reduce credit risk in connection with certain sales, the Company may, depending upon the circumstances, require significant deposits or payment in full prior to shipment. 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 Judgments

The Company’s contracts with customers often include promises to transfer multiple products and services to a customer. For such arrangements, the Company 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 is 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 an ongoing process and information is reviewed regularly in order to ensure SSP reflects the most current information or trends.

The nature of the Company’s marketing incentives may 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 estimates.

Contract Balances

The 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 Balance Sheets.~~consolidated balance sheets. Timing of revenue recognition may differ from the timing of invoicing to customers. The Company records a receivable when revenue is recognized at the time of invoicing, 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 for the remainder of the owed contract price. 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 ~~September~~June 30, ~~2018.~~2019.

Through ~~September~~June 30, ~~2018,~~2019, the Company recognized revenue of ~~$33,596~~$18,521 related to our contract liabilities at January 1, ~~2018.~~2019.

Practical Expedients and Exemptions

The Company generally expenses sales commissions when incurred because the amortization period would be one year or less. These costs are recorded within selling, general and administrative expenses.

(3) ~~Inventories~~Leases

The Company has various lease agreements for its facilities, equipment and vehicles with remaining lease terms ranging from one to seventeen years. The Company determines if an arrangement contains a lease at inception. Some leases include the options to purchase, terminate or extend for one or more years; these options are included in the ROU asset and liability lease term when it is reasonably certain an option will be exercised. The Company's leases do not contain any material residual value guarantees or material restrictive covenants.

Most of the Company's leases do not provide an implicit rate, therefore the Company uses its incremental borrowing rate based on the information available at the commencement date to determine the present value of the future lease payments.

Certain of the Company’s leases include variable costs. Variable costs include non-lease components that were incurred based upon actual terms rather than contractually fixed amounts. In addition, variable costs are incurred for lease payments that are indexed to a change in rate or index. Because the right of use asset recorded on the balance sheet was determined based upon factors considered at the commencement date, subsequent changes in the rate or index that were not contemplated in the right of use asset balances recorded on the balance sheet result in variable expenses being incurred when paid during the lease term.

Components of lease cost were as follows:



(in thousands)	Quarter ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease cost	$	3,675	$	7,464
Finance lease cost - amortization expense	212		418
Finance lease cost - interest expense	115		230
Short-term lease cost	26		50
Variable lease cost	94		35
Total	$	4,122	$	8,197

Balance sheet classifications at June 30, 2019 are summarized below:



	June 30, 2019
(in thousands)	Right of use assets		Current right of use liabilities		Long-term right of use liabilities
Operating Leases	$	33,305	$	10,732	$	29,012
Finance Leases	4,321		719		6,261
Total	$	37,626	$	11,451	$	35,273

The Company’s future minimum lease payments as of June 30, 2019 under operating lease and finance leases, with initial or remaining lease terms in excess of one year, were as follows:



	June 30, 2019
(in thousands)	Operating Leases			Finance Leases
Years ending June 30:
2020	$	7,070		$	583
2021	9,895			1,098
2022	7,498			811
2023	6,977			813
2024	5,833			804
Thereafter	10,602			6,009
Total lease payments	47,875			10,118
Less: imputed interest	(8,144		)	(3,125		)
Present value of lease liabilities	$	39,731		$	6,993

Supplemental cash flow information related to our operating leases for the period ending June 30, 2019, was as follows:



(in thousands)	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases	$	7,610
Operating cash outflow from finance leases	$	229
Financing cash outflow from finance leases	$	338

Weighted-average remaining lease terms and discount rate for our operating leases for the period ending June 30, 2019, were as follows:

(4) Inventories

Components of inventories at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 are summarized as follows:



(in thousands)	2019		2018
Raw materials	$	49,393	$	49,624
Work in process	8,483		2,969
Finished goods and parts	76,060		80,568
Inventories	$	133,936	$	133,161

(in thousands) 2018 2017
Raw materials $ 50,533
$ 37,660
Work in process 4,318
3,906
Finished goods and parts 73,313
62,337
Inventories $ 128,164
$ 103,903

During the quarter ended September 30, 2018, the Company took efforts to increase inventory levels as it prepares to deliver on current backlog and anticipated orders. Additionally, 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.

~~(4)~~(5) Intangible Assets

Intangible assets, net, other than goodwill, at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 are summarized as follows:


	2018							2017								2019							2018
(in thousands)	Gross ^(a)		Accumulated Amortization			Net		Gross ^(a)		Accumulated Amortization			Net		Weighted Average Useful Life Remaining (in years)	Gross ^(a)		Accumulated Amortization			Net		Gross ^(a)		Accumulated Amortization			Net		Weighted Average Useful Life Remaining (in years)
Intangible assets with finite lives:
Customer relationships	$	103,833	$	(64,853	)	$	38,980	$	105,505	$	(57,796	)	$	47,709	6	$	103,638	$	(72,745	)	$	30,893	$	103,332	$	(67,129	)	$	36,203	5
Acquired technology	49,032		(42,677		)	6,355		54,716		(39,644		)	15,072		2	53,745		(50,279		)	3,466		52,691		(47,546		)	5,145		2
Trade names	25,200		(17,111		)	8,089		25,813		(15,552		)	10,261		6	23,937		(18,001		)	5,936		25,096		(17,669		)	7,427		5
Patent costs	18,061		(8,086		)	9,975		17,909		(7,338		)	10,571		15	11,548		(8,914		)	2,634		11,032		(8,382		)	2,650		14
Trade secrets	19,393		(13,066		)	6,327		19,431		(11,530		)	7,901		4	19,432		(14,639		)	4,793		19,374		(13,574		)	5,800		3
Acquired patents	16,220		(12,761		)	3,459		16,661		(11,969		)	4,692		8	16,215		(13,958		)	2,257		16,212		(13,160		)	3,052		7
Other	19,624		(18,350		)	1,274		20,012		(17,435		)	2,577		2	26,457		(19,169		)	7,288		26,551		(18,553		)	7,998		1
Total intangible assets	$	251,363	$	(176,904	)	$	74,459	$	260,047	$	(161,264	)	$	98,783	6	$	254,972	$	(197,705	)	$	57,267	$	254,288	$	(186,013	)	$	68,275	5

^(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 ~~$7,811~~$5,718 and ~~$23,714~~$11,238 for the quarter and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, respectively, compared to ~~$8,845~~$7,836 and ~~$26,661~~$15,903 for the quarter and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively.

~~(5)~~(6) Accrued and Other Liabilities

Accrued liabilities at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 are summarized as follows:



(in thousands)	2019		2018
Compensation and benefits	$	21,498	$	23,787
Accrued taxes	17,204		17,246
Vendor accruals	8,274		6,895
Product warranty liability	3,629		3,788
Arbitration awards	2,256		2,256
Accrued professional fees	2,117		1,657
Accrued other	3,460		2,219
Royalties payable	1,292		1,417
Total	$	59,730	$	59,265

(in thousands) 2018 2017
Compensation and benefits $ 22,086
$ 20,432
Accrued taxes 17,832
13,861
Vendor accruals 7,378
7,044
Product warranty liability 5,802
5,564
Arbitration awards 2,256
11,282
Accrued professional fees 2,222
742
Accrued other 1,445
2,485
Royalties payable 1,469
1,679
Accrued earnouts related to acquisitions 1,073
2,772
Accrued interest 113
38
Total $ 61,676
$ 65,899

Other liabilities at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 are summarized as follows:



(in thousands)	2019		2018
Long term employee indemnity	$	14,369	$	13,609
Long term tax liability	3,851		4,168
Defined benefit pension obligation	8,472		8,518
Long term deferred revenue	6,910		8,121
Other long term liabilities	8,439		4,915
Total	$	42,041	$	39,331

(in thousands) 2018 2017
Long term employee indemnity $ 13,748
$ 13,887
Long term tax liability 9,030
9,340
Defined benefit pension obligation 8,006
8,290
Long term deferred revenue 7,637
7,298
Other long term liabilities 6,201
7,596
Long term earnouts related to acquisitions —
2,343
Total $ 44,622
$ 48,754

~~(6)~~(7) Borrowings

Credit Facility

On February 27, 2019, the Company, as borrower, and certain of its subsidiaries, as guarantors, entered into a 5-year $100,000 senior secured term loan facility (the “Term Facility”) and a 5-year $100,000 senior secured revolving credit facility (the “Revolving Facility” and, together with the Term Facility, the “Senior Credit Facility”). The Senior Credit Facility replaced the Company's prior $150,000 5-year revolving, unsecured credit facility(the "Prior Credit Agreement"), which was terminated on February 27, 2019 in connection with the entry into the Senior Credit Facility. The proceeds of the Senior Credit Facility were used to refinance existing indebtedness of $25,000 outstanding under the Prior Credit Agreement and will be used to support working capital and for general corporate purposes. Subject to certain terms and conditions contained in the Revolving Facility, the Company has the right to request up to four increases to the amount of the Revolving Facility in an aggregate amount not to exceed $100,000. The Senior Credit Facility is scheduled to mature on February 26, 2024, at which time all amounts outstanding thereunder will be due and payable. However, the maturity date of the Revolving Facility may be extended at the election of the Company with the consent of the lenders subject to the terms set forth in the Senior Credit Facility.

Pursuant to the Senior Credit Facility, the guarantors guarantee, among other things, all of the obligations of the Company and each other guarantor under the Senior Credit Facility. From time to time, the Company may be required to cause additional domestic subsidiaries to become guarantors under the Senior Credit Facility.

The Senior Credit Facility contains customary covenants, some of which require the Company to maintain certain financial ratios that determine the amounts available and terms of borrowings and events of default. The Company was in compliance with all covenants at June 30, 2019.

The payment of dividends on the Company’s common stock is restricted under provisions of the Senior Credit Facility, which limits the amount of cash dividends that the Company may pay in any one fiscal year to $30,000. The Company currently does not pay, and has not paid, any dividends on its common stock, and currently intends to retain any future earnings for use in its business.

The Company had a balance of $80,000 outstanding on the Term Facility at June 30, 2019 at an interest rate of 4.9%, with $4,050 in principal payments due in the next twelve months.

(8) Hedging Activities and Financial Instruments

The 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 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 ~~$75,483~~$88,304 and ~~$39,600~~$75,304 in notional foreign exchange contracts outstanding as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. The fair values of these contracts were not material.

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.

~~(7) Borrowings~~

~~Credit Facility~~

As of September 30, 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, 2018 and December 31, 2017. There were no outstanding borrowings as of September 30, 2018.

~~Capitalized Lease Obligations~~

The 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.

~~(8) Pension Benefits~~

The components of the Company’s pension cost recognized in the condensed consolidated statements of operations and comprehensive loss for the quarter and nine months ended September 30, 2018 and 2017 were as follows:

Quarter Ended September 30, Nine Months Ended September 30,
(in thousands) 2018 2017 2018 2017
Service cost $ 49
$ 75
$ 151
$ 212
Interest cost 69
72
212
205
Amortization of actuarial loss 44
64
134
182
Total periodic cost $ 162
$ 211
$ 497
$ 599

(9) Net Loss Per Share

The 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.



	Quarter Ended June 30,						Six Months Ended June 30,
(in thousands, except per share amounts)	2019			2018			2019			2018
Numerator for basic and diluted net loss per share:
Net loss attributable to 3D Systems Corporation	$	(23,929	)	$	(8,862	)	$	(48,324	)	$	(29,819	)

Denominator for basic and diluted net loss per share:
Weighted average shares	113,433			111,920			113,350			111,870

Net loss per share - basic and diluted	$	(0.21	)	$	(0.08	)	$	(0.43	)	$	(0.27	)

Quarter Ended September 30, Nine Months Ended September 30,
(in thousands, except per share amounts) 2018 2017 2018 2017
Numerator for basic and diluted net loss per share:
Net loss attributable to 3D Systems Corporation $ (11,550 ) $ (37,670 ) $ (41,369 ) $ (56,057 )

Denominator for basic and diluted net loss per share:
Weighted average shares 112,534
111,697
112,095
111,467

Net loss per share - basic and diluted $ (0.10 ) $ (0.34 ) $ (0.37 ) $ (0.50 )

For the quarters ended June 30, 2019 and ~~nine months ended September 30,~~ 2018, ~~and 2017,~~ the effect of dilutive securities, including non-vested stock options and restricted stock awards/units, was excluded from the denominator for the calculation of diluted net loss per share because the Company recognized a net loss for the period and their inclusion would be anti-dilutive. Dilutive securities excluded ~~were 5,770 and 5,455~~ for the quarter and ~~nine~~six months ended ~~September~~June 30, ~~2018, respectively,~~2019 were 7,117 compared to ~~2,909~~4,168 and ~~2,712~~4,167 for the quarter ended and ~~nine~~six months ended ~~September~~June 30, ~~2017, respectively.~~2018.

(10) Fair Value Measurements

ASC 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:

Level 1 - Quoted prices in active markets for identical assets or liabilities;

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

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.~~Israeli severance funds. 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:


	Fair Value Measurements as of September 30, 2018								Fair Value Measurements as of June 30, 2019
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Description
Cash equivalents _(a)	$	8,920	$	—	$	—	$	8,920	$	41,077	$	—	$	—	$	41,077
Earnout consideration _(b)	$	—	$	—	$	1,073	$	1,073
Israeli severance funds ^(b)									$	—	$	7,115	$	—	$	7,115

	Fair Value Measurements as of December 31, 2017								Fair Value Measurements as of December 31, 2018
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Description
Cash equivalents _(a)	$	20,244	$	—	$	—	$	20,244	$	6,141	$	—	$	—	$	6,141
Earnout consideration _(b)	$	—	$	—	$	5,115	$	5,115
Israeli severance funds ^(b)									$	—	$	6,822	$	—	$	6,822


(a)	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.

(b)

The ~~fair~~Company partially funds the liability for its Israeli severance requirement through monthly deposits into fund accounts, the value of ~~the earnout consideration, which is based~~these contributions are recorded to non-current assets 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 $2,675 payment, partially offset by $248 of accretion and adjustments of $1,615.consolidated balance sheet.

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 ~~and nine months~~ ended ~~September~~June 30, ~~2018.~~2019.

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~~2018 Form 10-K.

(11) Income Taxes

For the quarter and ~~nine~~six months ended ~~September~~June 30, 2019, the Company recorded expense of $1,938 and $3,782, resulting in effective tax rates of 8.8% and 8.5%, respectively. For the quarter and six months ended June 30, 2018, the Company recorded expense of ~~$1,593~~$2,539 and ~~$6,086, respectively,~~$4,493, resulting in effective tax rates of ~~16.0%~~41.9% and ~~17.4%, respectively. For the quarter and nine months ended September 30, 2017, the Company recorded expense of $3,723 and $6,831, respectively, resulting in effective tax rates of 11.1% and 14.1%~~17.9%, respectively. The difference between the statutory rate and the effective tax rate in 2019 is mainly driven ~~from~~by the Company recording a valuation allowance on one of its foreign subsidiaries in China, withholding tax expense, release of a liability for uncertain tax positions related to a German tax audit, foreign rate differential between the U.S. tax rate and foreign tax rates, as well as the impact of the change in valuation allowances that the Company has recorded in the USU.S. and other foreign jurisdictions, ~~for both quarters and nine months ended September 30, 2018 and 2017. Additionally, for~~while in 2018 the ~~Company settled a tax audit with~~impact was mainly driven by the ~~French tax authorities, which resulted~~change in ~~additional tax expense and also contributed to the difference between the statutory rate and the effective tax rate for the nine months ended September 30, 2018.~~

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 are 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 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,valuation allowance that the Company recorded provisional amounts, and additional work is still necessary for a more detailed analysis of the Company’s deferred tax assets and liabilities and its historical foreign earnings as well as potential correlative adjustments. Any subsequent adjustment to these amounts will behas recorded in the ~~fourth quarter~~U.S. and other foreign jurisdictions and foreign rate differential between the U.S. tax rate and foreign tax rates.

Due to the one time transition tax, the majority of ~~2018 when the analysis is complete.~~

As the Company’s previously unremitted earnings have now been subjected to U.S. federal income tax, ~~any repatriation of these earnings to the U.S. would not be expected to incur significant~~although, other additional taxes ~~related to~~ such ~~amounts.~~as withholding tax could be applicable. The Company continues to assert that its foreign earnings are indefinitely reinvested in our overseas ~~operations, but in light~~operations. As such, it has not provided for any additional taxes on approximately $100,268 of unremitted earnings. The Company believes the ~~Act, the Company~~unrecognized deferred tax liability related to these earnings is ~~continuing to evaluate its position on that assertion.~~approximately $15,100.

Tax years ~~2003 through 2017~~2013 and 2014 remain subject to examination by the U.S. Internal Revenue Service ~~with most of the~~("IRS") for certain credit carryforwards, while tax years 2015 through 2017 remain open to examination ~~due~~by the IRS. State income tax returns are generally subject to examination for a period of three to four years after filing the ~~generation and utilization of various~~respective tax ~~credits.~~returns. The Company files income tax returns (which are open to examination beginning in the year shown in parentheses) in Australia ~~(2013)~~(2014), Belgium ~~(2014)~~(2015), Brazil ~~(2012)~~(2013), China ~~(2015)~~(2016), France ~~(2014)~~(2016), Germany ~~(2014)~~(2015), India ~~(2013)~~(2014), Israel ~~(2013)~~(2014), Italy ~~(2012)~~(2013), Japan ~~(2012)~~(2014), Korea ~~(2012)~~(2013), Mexico ~~(2012)~~(2013), Netherlands ~~(2012)~~(2013), Switzerland ~~(2012)~~(2013), the United Kingdom ~~(2016)~~(2017) and Uruguay ~~(2012)~~(2014).

(12) Segment Information

The Company operates as one segment and conducts its business through various offices and facilities located throughout the Americas region (United States, Canada, Brazil, Mexico and Uruguay), EMEA region (Belgium, France, Germany, Israel, Italy, the Netherlands, Switzerland and the United Kingdom), and Asia Pacific region (Australia, China, India, Japan and Korea). 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:


	Quarter Ended September 30,				Nine Months Ended September 30,				Quarter Ended June 30,				Six Months Ended June 30,
(in thousands)	2018		2017		2018		2017		2019		2018		2019		2018
Revenue from unaffiliated customers:
United States	$	81,282	$	75,402	$	250,023	$	234,195	$	80,415	$	86,028	$	151,815	$	168,741
Other Americas	873		3,534		4,918		8,300		2,397		2,228		4,701		4,045
EMEA	55,020		52,457		169,300		158,864		55,776		56,859		115,420		114,280
Asia Pacific	27,336		21,514		82,707		67,446		18,684		31,453		37,316		55,371
Total revenue	$	164,511	$	152,907	$	506,948	$	468,805	$	157,272	$	176,568	$	309,252	$	342,437



	Quarter Ended June 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2019		2018
Revenue by class of product and service:
Products	$	52,530	$	65,741	$	103,447	$	128,368
Materials	41,228		45,044		82,658		87,863
Services	63,514		65,783		123,147		126,206
Total revenue	$	157,272	$	176,568	$	309,252	$	342,437

Quarter Ended September 30, Nine Months Ended September 30,
(in thousands) 2018 2017 2018 2017
Revenue by class of product and service:
Products $ 59,648
$ 51,331
$ 188,016
$ 160,153
Materials 40,274
39,399
128,137
126,096
Services 64,589
62,177
190,795
182,556
Total revenue $ 164,511
$ 152,907
$ 506,948
$ 468,805



	Quarter ended June 30, 2019
	Intercompany Sales to
(in thousands)	Americas		EMEA		Asia Pacific		Total
Americas	$	544	$	8,757	$	4,620	$	13,921
EMEA	18,758		14,914		757		34,429
Asia Pacific	697		18		687		1,402
Total intercompany sales	$	19,999	$	23,689	$	6,064	$	49,752



	Quarter ended June 30, 2018
	Intercompany Sales to
(in thousands)	Americas		EMEA		Asia Pacific		Total
Americas	$	738	$	14,243	$	6,992	$	21,973
EMEA	16,611		5,372		1,224		23,207
Asia Pacific	1,223		—		878		2,101
Total intercompany sales	$	18,572	$	19,615	$	9,094	$	47,281



	Six Months Ended June 30, 2019
	Intercompany Sales to
(in thousands)	Americas		EMEA		Asia Pacific		Total
Americas	$	990	$	25,465	$	8,456	$	34,911
EMEA	35,434		21,856		2,326		59,616
Asia Pacific	1,444		39		1,489		2,972
Total intercompany sales	$	37,868	$	47,360	$	12,271	$	97,499

Quarter Ended September 30, 2018
Intercompany Sales to
(in thousands) Americas EMEA Asia Pacific Total
Americas $ 499
$ 15,540
$ 4,888
$ 20,927
EMEA 18,259
6,939
1,551
26,749
Asia Pacific 1,134
15
923
2,072
Total intercompany sales $ 19,892
$ 22,494
$ 7,362
$ 49,748



	Six Months Ended June 30, 2018
	Intercompany Sales to
(in thousands)	Americas		EMEA		Asia Pacific		Total
Americas	$	1,022	$	30,224	$	12,415	$	43,661
EMEA	33,212		11,752		3,136		48,100
Asia Pacific	2,645		1		1,773		4,419
Total intercompany sales	$	36,879	$	41,977	$	17,324	$	96,180

Quarter Ended September 30, 2017
Intercompany Sales to
(in thousands) Americas EMEA Asia Pacific Total
Americas $ 554
$ 11,764
$ 5,390
$ 17,708
EMEA 16,057
4,286
985
21,328
Asia Pacific 613
8
772
1,393
Total intercompany sales $ 17,224
$ 16,058
$ 7,147
$ 40,429



	Quarter Ended June 30,						Six Months Ended June 30,
(in thousands)	2019			2018			2019			2018
(Loss) income from operations:
Americas	$	(24,025	)	$	(13,539	)	$	(50,857	)	$	(33,523	)
EMEA	3,477			(2,119		)	6,395			(3,334		)
Asia Pacific	1,382			7,936			3,991			11,669
Total	$	(19,166	)	$	(7,722	)	$	(40,471	)	$	(25,188	)

Nine Months Ended September 30, 2018
Intercompany Sales to
(in thousands) Americas EMEA Asia Pacific Total
Americas $ 1,521
$ 45,764
$ 17,303
$ 64,588
EMEA 51,471
18,691
4,687
74,849
Asia Pacific 3,779
16
2,696
6,491
Total intercompany sales $ 56,771
$ 64,471
$ 24,686
$ 145,928

Nine Months Ended September 30, 2017
Intercompany Sales to
(in thousands) Americas EMEA Asia Pacific Total
Americas $ 1,452
$ 34,414
$ 14,243
$ 50,109
EMEA 50,761
13,014
2,900
66,675
Asia Pacific 1,492
165
2,921
4,578
Total intercompany sales $ 53,705
$ 47,593
$ 20,064
$ 121,362

Quarter Ended September 30, Nine Months Ended September 30,
(in thousands) 2018 2017 2018 2017
(Loss) income from operations:
Americas $ (16,599 ) $ (32,749 ) $ (50,122 ) $ (65,897 )
EMEA 386
(3,272 ) (2,948 ) 4,474
Asia Pacific 5,229
3,686
16,898
13,153
Total $ (10,984 ) $ (32,335 ) $ (36,172 ) $ (48,270 )

(13) Commitments and Contingencies

The Company leases certain of its facilities and equipment under non-cancelable operating leases. For the quarter and nine months ended September 30, 2018, rent expense under operating leases was $3,788 and $12,288, respectively, compared to $4,009 and $11,461 for the quarter and nine months ended September 30, 2017, 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, 2018 and December 31, 2017 was $1,073 and $5,115, respectively. See Note 5.

Put Options

Owners 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~~June 30, ~~2018,~~2019, 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~~June 30, ~~2018~~2019 and December 31, ~~2017.~~2018. The ultimate amount payable relating to this transaction will vary because it is dependent on the future results of operations of the subject business.

Litigation

~~Securities and~~ Derivative Litigation

The 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. On February 14, 2018, following mediation, the parties entered into a Stipulation of Settlement that provided for, among other things, payment of $50,000 by the Company’s insurance carriers and a mutual exchange of releases. The Stipulation of Settlement called 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 Court held a final fairness hearing on June 25, 2018, and entered the Order and Final Judgment and Order Awarding Attorneys’ Fees on the same day. The Company's insurance carriers have funded the entire settlement amount. The time for any party to appeal expired on July 25, 2018 and no appeals were filed. The matter is now concluded. At December 31, 2017 the Company's balance sheet reflected the entire settlement as a current liability with an offsetting receivable for related insurance proceeds.

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 derivative 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.

The ~~Company believes~~parties to the ~~claims alleged~~derivative actions listed above, following negotiations with the assistance of a mediator, have reached an agreement in principle to resolve all of the above actions, subject to execution of a stipulation of settlement and court approval. The parties intend to file and seek approval of the settlement in the derivative ~~lawsuits are without merit and intends to defend~~action captioned Nally v. Reichental, et al., Docket No. 0:15-cv-03756-MGL (D.S.C. Sept. 18, 2015), pending before Hon. Mary Geiger Lewis of the ~~Company and its officers and directors vigorously.~~U.S. District Court for the District of South Carolina.

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 captioned Ronald Barranco v. 3D Systems Corporation, 3D Systems, Inc., Abraham Reichental, and Damon Gregoire, Case No. CV 13-412 LEK RLP, and alleges the same seven causes of action relating to the Company’s acquisition of certain website domains from Mr. Barranco and the subsequent employment of Mr. Barranco by the Company. Both Barranco I and Barranco II allege the Company breached certain purchase agreements in order to avoid paying Mr. Barranco additional monies pursuant to royalty and earn out provisions in the agreements. The Company and its officers timely filed responsive pleadings on October 22, 2013 seeking, inter alia, to dismiss Barranco I due to a mandatory arbitration agreement and for lack of personal jurisdiction and to dismiss Barranco II for lack of personal jurisdiction.

With regard to Barranco I, the Hawaii district court, on February 28, 2014, denied the Company’s motion to dismiss and its motion to transfer venue to South Carolina for the convenience of the parties. However, the Hawaii court recognized that ~~the plaintiff’s~~Barranco’s claims ~~are~~were 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. Barranco filed a demand for arbitration on October 29, 2014. On December 9, 2014, the Company filed its answer to Barranco’s demand for arbitration. On February 2, 2015, Barranco 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 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 Barranco. Pursuant to the award, the Company was directed 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~~

On August 3, 2018, following 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 Barranco in the same above-referenced amounts, but making certain substantive changesunsuccessful appeal 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~~Carolina and denying in part Barranco’s motion to confirm the arbitration award and for judgment, entering judgment in the principal amount of the arbitration award and denying Barranco’s motion for fees and costs. The court denied the Company’s motion to vacate. On September 7, 2016, Barranco 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. Barranco 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 Barranco’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 Company filed its Opening Brief and the Joint Appendix on August 28, 2017. Barranco filed its Opening Brief on September 11, 2017. The Company filed its Reply Brief on September 25, 2017.~~

~~On May 31, 2018, the Fourth~~ Circuit, affirmed the decision by unpublished per curiam opinion. On June 14, 2018, the Company timely filed Appellants’ Petition for Rehearing and Rehearing En Banc. On June 15, 2018 the Fourth Circuit issued a Stay of Mandate Under Fed. R. App. P. 41(d)(1). The Petition for Rehearing and Rehearing En Banc was subsequently denied and on August 1, 2018, the Fourth Circuit issued its mandate, thereby returning jurisdiction to the District Court and ending the stay. On August 2, 2018, the Company filed its Motion for Setoff of Judgment and Memorandum in Support of Motion for Setoff of Judgment. Barranco filed a response agreeing that setoff was appropriate, but contested the amount. On August 3, 2018, the Company paid $9,127 of the ~~Judgment,~~Barranco I judgment, net setoff. On August 7, 2018, Barranco filed a Notice of Motion and Motion to Enforce Surety Liability Against Berkley Insurance Co. ("Berkley") in the United States District Court for the Northern District of California, Barranco v. Berkley Insurance Co., Misc. Case No. 4:18-mc-80131-PJH, seeking entry of an order directing Berkley to pay Barranco $1,720, which was the portion of the Requested Setoff that Barranco disputed. On September 5, 2018, Berkley filed a Motion to Dismiss for Improper Venue in the California Action, seeking dismissal and/or transfer of the Surety Motion to the North Carolina Action. On September 28, 2018, the parties filed a Consent Stipulation Resolving Motion for Setoff of Judgment, stipulating that subject only to vacatur or amendment reducing the ~~Amended 3D Systems Judgment~~Barranco II judgment in Barranco’s appeal to the ~~9th~~Ninth Circuit ofrelated to the ~~Hawaii~~Barranco II action discussed below, the ~~Amended 3D Systems Judgment~~Barranco II judgment in the amount of $2,182 was setoff against the Barranco ~~Judgment~~I judgment (“Stipulated Setoff”). The Stipulated Setoff was deemed to resolve the North Carolina Setoff Motion and the California Surety Motion. On September 28, Barranco withdrew the California Surety Motion, which was rendered moot by the agreed setoff made under the provisions of this Stipulation. On October 1, 2018, Berkley withdrew its Motion to Dismiss for Improper Venue pending in the California Action. The Company paid Barranco the $101 balance remaining due ~~on the North Carolina Judgment~~ after the Stipulated Setoff.

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 Barranco’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 Barranco's claim for breach of contract and dismissed the 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 Hawaii district court 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 against Barranco and determined that 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 Barranco. The bench trial took place on November 20, 2017. The Court ordered the submission of proposed findings of fact and conclusions of law. The Company submitted its proposed Findings of Fact and Conclusions of Law on January 12, 2018. Barranco submitted his proposed findings on February 2, 2018. The Company submitted its Reply on February 16, 2018. On March 30, 2018, the ~~Court~~court entered Findings of Fact and Conclusions of Law and Order requiring Barranco to disgorge, and the Company recover, $523, representing all but four months of the full amount paid to Barranco as salary during his employment with the Company as well as a portion of the up front and buyout payments made to Barranco in connection with the purchase of certain web domains. In addition, the ~~Court~~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 was entered thereafter on April 2, 2018.

As the prevailing party, the Company moved for recovery of its fees and costs. On June 15, 2018, the federal magistrate judge entered Findings and Recommendation to Grant in Part and Deny in Part Defendants 3D Systems Corporation and 3D System Inc.’s Motion for an Award of Attorneys’ Fees, whereby it recommended that 3D Systems be awarded $1,299 in attorneys’ fees, $349 for the amount of the prejudgment interest, and $72 in non-taxable costs.

On April 19, 2018, Barranco filed a post-trial motion seeking to amend the findings and judgment. The Company opposed that motion. On April 30, 2018, Barranco filed a combined Rule 50 Motion for Judgment as a Matter of Law on the Company’s counterclaim and Rule 59 Motion for a New Trial. The Company also opposed that Motion. On June 29, 2018, Barranco filed partial objections to the Fee Award Report and Recommendation. On July 9, 2018, the Company filed its Response opposing those partial objections. All post-trial motions are currently pending before the Court.

On May 10, 2018, the Company put Barranco on notice that it intended to exercise its right of setoff in regard to any liability it may be determined to have to Barranco. More specifically, the Company notified Barranco that it intended to set off the amounts determined due to it in the Hawaii litigation against any liability 3D Systems was determined to have in the North Carolina arbitration on appeal. As discussed above, the Company filed a Motion and Memo for Setoff on August 2, 2018 with the North Carolina court and exercised its right of setoff on August 3, 2018. On September 5, 2018, Barranco filed a Notice of Appeal of the Hawaii Action to the United States Court of Appeals for the Ninth Circuit. On September 13, 2018, the Hawaii ~~District Court~~district court entered its Amended Judgment in a Civil Case, awarding ~~3D Systems~~the Company a final amended judgment of $2,182. On September 19, 2018, Barranco filed an Amended Notice of Appeal. ~~The Setoff Motion was resolved by consent stipulation on September 28 as discussed above. Appellants’ opening brief is due December 14. Appellee’s~~On January 13, 2019, Barranco filed Appellant’s Opening Brief in the Ninth Circuit. On March 15, 2019, the Company filed its Answering ~~Brief is due January 14.~~Brief. On April 14, 2019, Barranco filed his Reply Brief. The Company intends to defend the ~~appeal vigorously.~~appeal.

Export Controls and Government Contracts Compliance Matter

In 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~~the On Demand manufacturing business done by our subsidiary, Quickparts.com, Inc. ~~subsidiary.~~ In addition, while collecting information responsive to the ~~above referenced~~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 BIS.

On June 8, 2018 and thereafter, the Company submitted voluntary disclosures to BIS and DDTC identifying numerous potentially unauthorized exports of technical data, which supplemented an initial notice of voluntary disclosure that the Company submitted to DDTC in February 2018. The Company ~~is conducting an internal review of its~~has and will continue to implement compliance enhancements to export ~~control,~~controls, trade sanctions, and government contracting compliance ~~risks~~to address the issues identified through its internal investigation and ~~potential violations; implementing associated compliance enhancements; and cooperating~~cooperate with DDTC and BIS, as well as the U.S. Departments of Justice, Defense, and Homeland ~~Security.~~ Security, in their reviews of these matters.

In addition, on July 19, 2019, the Company received a notice of immediate suspension of federal contracting from the United States Air Force, pending the outcome of an ongoing investigation. The suspension applies to 3D Systems, its subsidiaries and affiliates, and is related to the potential export controls violations involving the Company’s On Demand manufacturing business described above. Under the suspension, the Company is generally prohibited from receiving new federal government contracts or subcontracts from any executive branch agency as described in the provisions of 48 C.F.R Subpart 9.4 of the Federal Acquisition Regulation. The suspension allows the Company to continue to perform current federal contracts, and also to receive awards of new subcontracts for items under $35 and for items considered commercially available off-the-shelf items. The Company has implemented significant compliance enhancements related to export controls designed to address the issues raised by the June 2018 disclosure and are engaging with the Air Force to lift the federal contracting suspension as soon as possible.

Although the Company cannot predict the ultimate resolution of these matters, the Company has incurred and expects to continue to incur significant legal costs and other expenses in connection with responding to the U.S. government agencies.

~~Throughout 2018,~~Other

The Company is involved in various other legal matters incidental to its business. Although the Company ~~has implemented and will continue to implement new compliance procedures to identify and prevent potential violations~~cannot predict the results of ~~export control laws, trade sanctions, and government contracting laws. As a result of these compliance enhancements,~~the litigation with certainty, the Company ~~has identified additional potential violations~~believes that the disposition of the ITAR, and has submitted related voluntary disclosures to DDTC. As the Company continues to implement additional compliance enhancements, it may discover potential violations of export control laws, trade sanctions, and/all these various other legal matters will not have a material adverse effect, individually or ~~government contracting laws~~ in the future, which may require disclosure to relevant agencies. If the Company identifies any additional potential violations, the Company will submit voluntary disclosures to the relevant agencies and cooperate with such agencies on any related investigations.

If the U.S. government finds that the Company has violated one or more export control laws, trade sanctions, or government contracting laws, the Company could be subject to various civil or criminal penalties. By statute, these penalties can include but are not limited to fines, which by statute may be significant, denial of export privileges, and suspension or debarment from participation in U.S. government contracts. The Company may also be subject to contract claims based upon such violations. Any assessment of penalties or other liabilities incurred in connection with these matters could harm the Company’s reputation and customer relationships, 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 the U.S. government agencies will conclude their investigations or determine an estimated cost, if any, or range of costs, for any penalties, fines or other liabilities to third parties that may be incurred in connection with these matters.

~~Indemnification~~

In 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 provisionsaggregate, on its ~~future~~consolidated results of ~~operations.~~operations, consolidated cash flows or consolidated financial position.

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.

(14) Accumulated Other Comprehensive Loss

The changes in the balances of accumulated other comprehensive loss by component are as follows:



(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, 2018	$	(36,669	)	$	(2,647	)	$	338	$	(38,978	)
Other comprehensive income (loss)	1,293			116			256		1,665
Balance at June 30, 2019	$	(35,376	)	$	(2,531	)	$	594	$	(37,313	)

(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) (14,491 ) 204
—
(14,287 )
Amounts reclassified from accumulated other comprehensive loss 1,401
—
—
1,401
Balance at September 30, 2018 $ (32,409 ) $ (2,351 ) $ 338
$ (34,422 )

~~Amounts reclassified out of accumulated other comprehensive loss are as follows:~~

Quarter Ended September 30, Nine Months Ended September 30,
(in thousands) 2018 2017 2018 2017 Statement of Operations Caption
Currency translation adjustments:
Gain on dissolution $ 1,401
$ —
$ 1,401
$ —
Interest and other income (expense), net

The amounts presented in the ~~tables~~table above are in other comprehensive loss and are net of taxes. For additional information about foreign currency translation, see Note 6.8.

(15) Noncontrolling Interests

As of ~~September~~June 30, ~~2018,~~2019, 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~~June 30, ~~2018,~~2019, the Company owned ~~approximately 70%~~100% 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.~~$2,300. The remaining 30% of the capital and voting rights of Easyway were acquired on January 21, 2019 for $13,500 to be paid in installments over four years, with the first installment of $2,500 paid in March 2019.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Item 1 (the “Financial Statements”) of this Quarterly Report on Form 10-Q (“Form 10-Q”). We are subject to a number of risks and uncertainties that may affect our future performance that are discussed in greater detail in the sections entitled “Forward-Looking Statements” at the end of this Item 2 and that are discussed or referred to in Item 1A of Part II of this Form 10-Q.

Business Overview

3D 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, materials, software, on 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, models, surgical guides and instruments. Our solutions, experience and expertise ~~have proven vital to our development of~~provide an ~~ecosystem and~~ end-to-end digital workflow ~~which enable customers~~from design to ~~optimize product designs, transform workflows, bring innovative products~~prototyping to ~~market and drive new business models.~~production. As the originator of 3D printing and a shaper of future 3D solutions, for over 30 years we have been enabling professionals and companies to optimize ~~their~~ designs, transform ~~their~~ 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.~~operation.

Summary of ~~Third~~Second Quarter~~2018~~ 2019 Financial Results

Total consolidated revenue for the quarter ended ~~September~~June 30, ~~2018 increased~~2019 decreased by ~~7.6%~~10.9%, or ~~$11.6~~$19.3 million, to ~~$164.5~~$157.3 million, compared to ~~$152.9~~$176.6 million for the quarter ended ~~September~~June 30, ~~2017.~~2018. These results reflect ~~an increase~~a decrease primarily in printers ~~materials, software, services~~revenue due to the timing of shipping of metals solutions and ~~healthcare revenue,~~large enterprise customer's orders in the prior year, as discussed ~~further below.~~below, as well as industrial softness, particularly in automotive and European customers.

Healthcare revenue includes sales of products, materials and services for healthcare-related applications, including simulation, training, planning, anatomical models, surgical guides and instruments and medical and dental devices. For the quarter ended ~~September~~June 30, ~~2018,~~2019, healthcare revenue ~~increased~~decreased by ~~13.9%~~8.1%, to ~~$53.1~~$56.4 million, and made up ~~32.2%~~35.8% of total revenue, compared to ~~$46.6~~$61.4 million, or ~~30.5%~~34.7% of total revenue, for the quarter ended ~~September~~June 30, ~~2017.~~2018. The ~~increase~~decrease primarily reflects the impact of the timing of orders of a large enterprise customer which was partially offset by increases in ~~healthcare revenue is driven by growth in products, including printers~~both materials and ~~materials.~~services revenues.

For the quarter ended ~~September~~June 30, ~~2018,~~2019, total software revenue from products and services ~~increased~~decreased by ~~7.5%~~0.5% to ~~$22.9~~$25.1 million, and made up ~~13.9%~~16.0% of total revenue, compared to ~~$21.3~~$25.3 million, or ~~14.0%~~14.3% of total revenue, for the quarter ended ~~September~~June 30, ~~2017.~~2018, driven by weakness in the automotive vertical which offset increased revenue from additive focused software solutions.

Gross profit for the quarter ended ~~September~~June 30, ~~2018 increased~~2019 decreased by ~~33.0%~~14.9%, or ~~$19.3~~$12.9 million, to ~~$77.8~~$73.3 million, compared to ~~$58.5~~$86.2 million for the quarter ended ~~September~~June 30, ~~2017.~~2018. Gross profit margin for the quarters ended ~~September~~June 30, 2019 and 2018 was 46.6% and ~~2017 was 47.3% and 38.3%~~48.8%, respectively. Both gross profit and gross profit margin were negatively impacted in the prior year due to inventory adjustments of $12.9 million related to product obsolescence as we aligned our product portfolio with our strategy.

Operating expenses for the quarter ended ~~September~~June 30, ~~2018~~2019 decreased by ~~2.3%~~1.5%, or ~~$2.1~~$1.4 million, to ~~$88.8~~$92.5 million, compared to ~~$90.9~~$93.9 million for the quarter ended ~~September~~June 30, ~~2017.~~2018. Selling, general and administrative expenses for the quarter ended ~~September~~June 30, ~~2018 decreased~~2019 increased by ~~1.4%~~0.7%, or ~~$0.9~~$0.5 million, to ~~$65.6~~$71.7 million, compared to ~~$66.5~~$71.2 million for the quarter ended ~~September~~June 30, 2017, predominantly due to a reduction in outside service costs as we made progress with transformation projects; partially offset by higher personnel and marketing-related costs as we have launched and begin to ramp up new product sales during 2018, continued investment in IT infrastructure, and higher legal expenses.2018. Research and development expenses for the quarter ended ~~September~~June 30, ~~2018~~2019 decreased by ~~4.9%~~8.4%, or ~~$1.2~~$1.9 million, to ~~$23.2~~$20.8 million, compared to ~~$24.4~~$22.7 million for the quarter ended ~~September~~June 30, ~~2017, as we reduced materials spend related to products which have been brought to market during~~ 2018.

Our operating loss for the quarter ended ~~September~~June 30, ~~2018~~2019 was ~~$11.0~~$19.2 million, compared to an operating loss of ~~$32.3~~$7.7 million for the quarter ended ~~September~~June 30, ~~2017.~~2018.

For the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018, ~~and 2017,~~ we ~~used $2.9~~generated $3.6 million and ~~generated $17.7~~$9.2 million of cash from operations, respectively, as further discussed below. In total, our unrestricted cash balance at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, was ~~$92.1~~$150.4 million and ~~$136.3~~$110.0 million, respectively. ~~Significant~~The higher cash ~~outflows during~~balance was the ~~nine months ended September 30, 2018 include~~result of our borrowing on the Senior Credit Facility, offset by

repayment of amounts outstanding on the Prior Credit Agreement as well as investments in ~~property, plant~~our facilities and ~~equipment; increases in inventory in support of new products;~~IT infrastructure. For information on the Senior Credit Facility and ~~other working capital balances, including $9.1 million paid for a previously accrued liability related to litigation.~~the Prior Credit Agreement, see Note 7.

Results of Operations

Comparison of revenue

In addition to changes in sales volumes, 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 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.

Comparison of revenue by geographic region

The following ~~table sets~~tables set forth changes in revenue by geographic region for the quarters and six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017.~~2018.

Table 1


(Dollars in thousands)	Americas					EMEA					Asia Pacific					Total					Americas					EMEA					Asia Pacific					Total
Revenue — third quarter 2017	$	78,936		51.6	%	$	52,457		34.3	%	$	21,514		14.1	%	$	152,907		100.0	%
Revenue — second quarter 2018																					$	88,256		50.0	%	$	56,859		32.2	%	$	31,453		17.8	%	$	176,568		100.0	%
Change in revenue:
Volume	5,546			7.0	%	4,624			8.8	%	5,813			27.0	%	15,983			10.5	%	(11,379		)	(12.9	)%	4,028			7.1	%	(10,840		)	(34.5	)%	(18,191		)	(10.3	)%
Price/Mix	(2,006		)	(2.5	)%	(1,301		)	(2.5	)%	514			2.4	%	(2,793		)	(1.8	)%	6,090			6.9	%	(2,425		)	(4.3	)%	(1,080		)	(3.4	)%	2,585			1.5	%
Foreign currency translation	(321		)	(0.4	)%	(760		)	(1.4	)%	(505		)	(2.3	)%	(1,586		)	(1.1	)%	(155		)	(0.2	)%	(2,686		)	(4.7	)%	(849		)	(2.7	)%	(3,690		)	(2.1	)%
Net change	3,219			4.1	%	2,563			4.9	%	5,822			27.1	%	11,604			7.6	%	(5,444		)	(6.2	)%	(1,083		)	(1.9	)%	(12,769		)	(40.6	)%	(19,296		)	(10.9	)%
Revenue — third quarter 2018	$	82,155		49.9	%	$	55,020		33.4	%	$	27,336		16.6	%	$	164,511		100.0	%
Revenue — second quarter 2019																					$	82,812		52.6	%	$	55,776		35.5	%	$	18,684		11.9	%	$	157,272		100.0	%

Consolidated revenue ~~increased 7.6%~~decreased by 10.9%, predominantly driven by ~~higher~~lower sales volume ~~across all geographic~~in the Americas and Asia Pacific regions, ~~including recently commercialized new 3D printers,~~which was largely driven by the higher volume of orders from a large enterprise customer in 2018, partially offset by ~~an unfavorable impact of~~favorable price/mix in the Americas ~~and EMEA regions, which was~~primarily driven by product mix and the unfavorable impact of foreign currency. The increased sales volume across all geographic regions is due to higher demand from healthcare customers as well as a range of customers across verticals. The negative price/mix impact across the Americas and EMEA regions is driven by higher sales of lower priced printer models and mix of materials sales.favorable pricing for production printers.

For the quarters ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, revenue from operations outside the U.S. was ~~50.6%~~48.9% and 51.3% of total revenue, respectively.

Table 2



(Dollars in thousands)	Americas					EMEA					Asia Pacific					Total
Revenue — six months 2018	$	172,786		50.5	%	$	114,280		33.4	%	$	55,371		16.2	%	$	342,437		100.0	%
Change in revenue:
Volume	(24,443		)	(14.1	)%	10,460			9.2	%	(14,470		)	(26.1	)%	(28,453		)	(31.0	)%
Price/Mix	8,610			5.0	%	(2,006		)	(1.8	)%	(2,006		)	(3.6	)%	4,598			(0.4	)%
Foreign currency translation	(437		)	(0.3	)%	(7,314		)	(6.4	)%	(1,579		)	(2.9	)%	(9,330		)	(9.6	)%
Net change	(16,270		)	(9.4	)%	1,140			1.0	%	(18,055		)	(32.6	)%	(33,185		)	(9.7	)%
Revenue — six months 2019	$	156,516		50.6	%	$	115,420		37.3	%	$	37,316		12.1	%	$	309,252		100.0	%

Consolidated revenue decreased 9.7%, predominantly driven by lower sales volume in the Americas and Asia Pacific regions which was largely driven by the timing of orders from a large enterprise customer and the unfavorable impact of foreign currency, particularly in EMEA, partially offset by increased volume for services and printers in EMEA and favorable price/mix in the Americas driven by materials and production printers.

For the six months ended June 30, 2019 and 2018, revenue from operations outside the U.S. was 50.9% and 50.7% of total revenue, respectively.

~~The following table sets forth changes in revenue by geographic region for the nine months ended September 30, 2018 and 2017.~~

~~Table 2~~

(Dollars in thousands) Americas EMEA Asia Pacific Total
Revenue — nine months 2017 $ 242,495
51.7 % $ 158,864
33.9 % $ 67,446
14.4 % $ 468,805
100.0 %
Change in revenue:
Volume 28,458
11.7 % 8,640
5.4 % 10,239
15.2 % 47,337
10.1 %
Price/Mix (15,539 ) (6.4 )% (7,517 ) (4.7 )% 2,868
4.3 % (20,188 ) (4.3 )%
Foreign currency translation (473 ) (0.2 )% 9,313
5.9 % 2,154
3.2 % 10,994
2.3 %
Net change 12,446
5.1 % 10,436
6.6 % 15,261
22.7 % 38,143
8.1 %
Revenue — nine months 2018 $ 254,941
50.3 % $ 169,300
33.4 % $ 82,707
16.3 % $ 506,948
100.0 %

Consolidated revenue increased 8.1%, predominantly driven by higher sales volume across all geographic regions, the favorable impact of price/mix in the Asia Pacific region, and the favorable impact of foreign currency; offset by an unfavorable impact of price/mix in the Americas and EMEA regions. The increase in sales volume across all geographic regions is due to higher demand from healthcare customers as well as a range of customers across verticals. The shift in price/mix across the Americas and EMEA regions relates to the mix of sales, including higher sales of lower priced printer models and mix of materials sales. The shift in price/mix in the Asia Pacific region relates to the mix of sales, including higher sales of higher priced printer models and mix of materials sales.

~~For the nine months ended September 30, 2018 and 2017, revenue from operations outside the U.S. was 50.7% and 50.0% of total revenue, respectively.~~

Comparison of revenue by class

We earn revenue from the sale of products, materials and services. The products category includes 3D printers, healthcare simulators and digitizers, software licenses, 3D scanners and haptic devices. The materials category includes a wide range of 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 maintenance contracts and services on 3D printers and simulators, software maintenance, on demand solutions and healthcare services. Beginning in 2018, product warranty revenue and related expenses are included within the products category, and we have reclassified prior period amounts from services to products to conform to current year presentation.

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, 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.

The following ~~table sets~~tables set forth the change in revenue by class for the quarters and six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017.~~2018.

Table3


(Dollars in thousands)	Products					Materials					Services					Total					Products					Materials					Services					Total
Revenue — third quarter 2017	$	51,331		33.5	%	$	39,399		25.8	%	$	62,177		40.7	%	$	152,907		100.0	%
Revenue — second quarter 2018																					$	65,741		37.2	%	$	45,044		25.5	%	$	65,783		37.3	%	$	176,568		100.0	%
Change in revenue:
Volume	10,843			21.1	%	2,176			5.5	%	2,964			4.8	%	15,983			10.5	%	(12,343		)	(18.8	)%	(5,121		)	(11.4	)%	(727		)	(1.1	)%	(18,191		)	(10.3	)%
Price/Mix	(1,764		)	(3.4	)%	(1,029		)	(2.6	)%	—			—	%	(2,793		)	(1.8	)%	314			0.5	%	2,271			5.0	%	—			—	%	2,585			1.5	%
Foreign currency translation	(762		)	(1.5	)%	(272		)	(0.7	)%	(552		)	(0.9	)%	(1,586		)	(1.1	)%	(1,182		)	(1.8	)%	(966		)	(2.1	)%	(1,542		)	(2.3	)%	(3,690		)	(2.1	)%
Net change	8,317			16.2	%	875			2.2	%	2,412			3.9	%	11,604			7.6	%	(13,211		)	(20.1	)%	(3,816		)	(8.5	)%	(2,269		)	(3.4	)%	(19,296		)	(10.9	)%
Revenue — third quarter 2018	$	59,648		36.3	%	$	40,274		24.5	%	$	64,589		39.3	%	$	164,511		100.0	%
Revenue — second quarter 2019																					$	52,530		33.4	%	$	41,228		26.2	%	$	63,514		40.4	%	$	157,272		100.0	%

Consolidated revenue ~~increased 7.6%~~decreased 10.9%, predominantly driven by ~~higher sales volume across all~~the products revenue ~~categories, including~~category which was driven by the impact of ~~new~~timing of orders of printers ~~launched~~by a large enterprise customer including large orders in ~~2018,~~the prior year and timing of shipments of metals printers, only partially offset by ~~a shift in sales mix which impacted average selling price for both products and materials as well as the unfavorable impact of foreign currency.~~

~~Products~~ revenue ~~increased due to higher demand~~ from ~~healthcare and a wide range of other verticals and across our portfolio, including the~~ recently commercialized new products; partially offset by changes in product mix which impacted average selling prices, including the impact of higher sales of lower priced printers, and the unfavorable impact of foreign currency.launched printer models. For the quarters ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, revenue from printers contributed ~~$34.5~~$30.0 million and ~~$29.4~~$41.3 million, respectively. Software revenue included in the products category, including scanners and haptic devices, contributed ~~$12.0~~$13.7 million and ~~$10.6~~$14.1 million for the quarters ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

Materials revenue ~~increased~~decreased due to ~~higher~~lower sales volume offset by a change in price/mix. The decline in volume is driven by weaker demand for materials utilized in older printer models, only partially offset by demand for new materials.

Services revenue decreased due to lower revenue from on demand solutions and from the ~~unfavorable impact of mix of sales~~entertainment business, which the company exited in 2019, and the unfavorable impact of foreign ~~currency.~~

~~Services revenue increased due to higher sales volume,~~currency translation, partially offset by ~~the unfavorable impact of foreign currency translation.~~increased revenue from healthcare services. For the quarters ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, revenue from on demand manufacturing services contributed ~~$26.3~~$24.0 million and ~~$27.2~~$27.4 million, respectively. For the quarters ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, software services revenue contributed ~~$11.0~~$11.4 million and ~~$10.7~~$11.2 million, respectively.

~~The following table sets forth the change in revenue by class for the nine months ended September 30, 2018 and 2017.~~

Table4


(Dollars in thousands)	Products					Materials					Services				Total					Products					Materials					Services					Total
Revenue — nine months 2017	$	160,153		34.2	%	$	126,096		26.9	%	$	182,556	38.9	%	$	468,805		100.0	%
Revenue — six months 2018																				$	128,368		37.5	%	$	87,863		25.7	%	$	126,206		36.9	%	$	342,437		100.0	%
Change in revenue:
Volume	32,823			20.5	%	10,176			8.1	%	4,338		2.4	%	47,337			10.1	%	(24,054		)	(18.7	)%	(4,951		)	(5.6	)%	552			0.4	%	(28,453		)	(23.9	)%
Price/Mix	(8,567		)	(5.3	)%	(11,621		)	(9.2	)%	—		—	%	(20,188		)	(4.3	)%	2,410			1.9	%	2,188			2.5	%	—			—	%	4,598			4.4	%
Foreign currency translation	3,607			2.3	%	3,486			2.8	%	3,901		2.1	%	10,994			2.3	%	(3,277		)	(2.6	)%	(2,442		)	(2.8	)%	(3,611		)	(2.9	)%	(9,330		)	(8.3	)%
Net change	27,863			17.5	%	2,041			1.7	%	8,239		4.5	%	38,143			8.1	%	(24,921		)	(19.4	)%	(5,205		)	(5.9	)%	(3,059		)	(2.4	)%	(33,185		)	(9.7	)%
Revenue — nine months 2018	$	188,016		37.1	%	$	128,137		25.3	%	$	190,795	37.6	%	$	506,948		100.0	%
Revenue — six months 2019																				$	103,447		33.5	%	$	82,658		26.7	%	$	123,147		39.8	%	$	309,252		100.0	%

Consolidated revenue ~~increased 8.1%~~decreased 9.7%, predominantly driven by ~~higher sales volume across all~~the products revenue ~~categories~~category which was impacted by the timing of orders from a large enterprise customer, including large orders in the prior year, timing of shipping metals printers and ~~the favorable impact~~unfavorable impacts of foreign currency translation, only partially offset by ~~a shift in sales mix which impacted average selling price for both products and materials.~~

~~Products~~ revenue ~~increased due to higher demand~~ from customers from a range of verticals, including healthcare customers, and across our portfolio, including contributions from new products during the third quarter, and the favorable impact of foreign currency, partially offset by changes in product mix which impacted average selling prices, including the impact of higher sales of lower priced printers.recently launched printer models. For the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, revenue from printers contributed ~~$113.0~~$59.9 million and ~~$88.5~~$83.4 million, respectively. Software revenue

included in the products category, including scanners and haptic devices, contributed ~~$36.5~~$25.9 million and ~~$33.2~~$25.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

Materials revenue ~~increased~~decreased due to ~~higher~~lower sales volume and the ~~favorable~~unfavorable impact of foreign currency, offset by a ~~change~~favorable impact from price/mix. The decline in ~~sales mix which negatively impacted price/mix.~~volume is driven by weaker demand for materials utilized in older printer models, only partially offset by demand for new materials.

Services revenue ~~increased~~decreased due to ~~higher sales volume as well as~~ the ~~favorable~~unfavorable impact of foreign currency translation. For the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, revenue from on demand manufacturing services contributed ~~$79.3~~$46.6 million and ~~$78.1~~$53.1 million, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, software services revenue contributed ~~$33.0~~$22.2 million and ~~$32.5~~$22.1 million, respectively.

Gross profit and gross profit margins

The following tables set forth gross profit and gross profit margins for the quarters and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017.~~2018.

Table 5


	Quarter Ended September 30,																		Quarter Ended June 30,
	2018				2017					Change in Gross Profit					Change in Gross Profit Margin				2019				2018				Change in Gross Profit					Change in Gross Profit Margin
(Dollars in thousands)	Gross Profit		Gross Profit Margin		Gross Profit			Gross Profit Margin		$			%		Percentage Points		%		Gross Profit		Gross Profit Margin		Gross Profit		Gross Profit Margin		$			%		Percentage Points		%
Products	17,522		29.4	%	(451		)	(0.9	)%	17,973			3985	%	30.3		3443	%	12,345		23.5	%	21,041		32.0	%	(8,696		)	(41.3	)%	(8.5	)	(26.6	)%
Materials	27,956		69.4	%	28,519			72.4	%	(563		)	(2.0	)%	(3.0	)	(4.1	)%	28,408		68.9	%	32,244		71.6	%	(3,836		)	(11.9	)%	(2.7	)	(3.8	)%
Services	32,332		50.1	%	30,454			49.0	%	1,878			6.2	%	1.1		2.2	%	32,546		51.2	%	32,877		50.0	%	(331		)	(1.0	)%	1.2		2.4	%
Total	$	77,810	47.3	%	$	58,522		38.3	%	$	19,288		33.0	%	9.0		23.6	%	$	73,299	46.6	%	$	86,162	48.8	%	$	(12,863	)	(14.9	)%	(2.2	)	(4.5	)%



~~DELAWARE~~Delaware	~~95‑4431352~~95-4431352
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)



Large accelerated filer	x☒		Accelerated filer	¨☐
Non-accelerated filer	¨☐	(Do not check if smaller reporting company)	Smaller reporting company	¨☐
Emerging growth company	¨☐



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	DDD	New York Stock Exchange



PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	23
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	3433
Item 4. Controls and Procedures.	3433
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.	3433
Item 1A. Risk Factors.	3433
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	35
Item 6. Exhibits.	36

Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2


(In thousands, except par value)	September 30, 2018 (unaudited)			December 31, 2017			June 30, 2019 (unaudited)			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	92,093		$	136,344		$	150,397		$	109,998
Accounts receivable, net of reserves — $11,029 (2018) and $10,258 (2017)	127,092			129,879
Accounts receivable, net of reserves — $8,509 (2019) and $8,423 (2018)							114,093			126,618
Inventories	128,164			103,903			133,936			133,161
Insurance proceeds receivable	—			50,000
Prepaid expenses and other current assets	27,028			18,296			29,471			27,697
Total current assets	374,377			438,422			427,897			397,474
Property and equipment, net	104,780			97,521
Property and equipment, net ⁽¹⁾							97,664			103,252
Intangible assets, net	74,459			98,783			57,267			68,275
Goodwill	224,040			230,882			222,293			221,334
Right of use assets⁽¹⁾							37,626			4,466
Deferred income tax asset	7,171			4,020			5,420			4,217
Other assets, net	26,143			27,136			29,384			26,814
Total assets	$	810,970		$	896,764		$	877,551		$	825,832
LIABILITIES AND EQUITY
Current liabilities:
Current portion of capitalized lease obligations	$	651		$	644
Current portion of long term debt							$	4,050		$	—
Current right of use liabilities ⁽¹⁾							11,451			654
Accounts payable	61,556			55,607			59,197			66,722
Accrued and other liabilities	61,676			65,899			59,730			59,265
Accrued litigation settlement	—			50,000
Customer deposits	4,934			5,765			4,882			4,987
Deferred revenue	34,899			29,214			41,690			32,432
Total current liabilities	163,716			207,129			181,000			164,060
Long term portion of capitalized lease obligations	6,563			7,078
Long-term debt							75,378			25,000
Long-term right of use liabilities ⁽¹⁾							35,273			6,392
Deferred income tax liability	9,002			8,983			6,541			6,190
Other liabilities	44,622			48,754			42,041			39,331
Total liabilities	223,903			271,944			340,233			240,973
Redeemable noncontrolling interests	8,872			8,872			8,872			8,872
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.001 par value, authorized 220,000 shares; issued 118,452 (2018) and 117,025 (2017)	117			115
Common stock, $0.001 par value, authorized 220,000 shares; issued 120,506 (2019) and 118,650 (2018)							120			117
Additional paid-in capital	1,347,332			1,326,250			1,361,569			1,355,503
Treasury stock, at cost — 2,769 shares (2018) and 2,219 shares (2017)	(13,926		)	(8,203		)
Treasury stock, at cost — 3,182 shares (2019) and 2,946 shares (2018)							(16,519		)	(15,572		)
Accumulated deficit	(718,565		)	(677,772		)	(771,025		)	(722,701		)
Accumulated other comprehensive loss	(34,422		)	(21,536		)	(37,313		)	(38,978		)
Total 3D Systems Corporation stockholders' equity	580,536			618,854			536,832			578,369
Noncontrolling interests	(2,341		)	(2,906		)	(8,386		)	(2,382		)
Total stockholders’ equity	578,195			615,948			528,446			575,987
Total liabilities, redeemable noncontrolling interests and stockholders’ equity	$	810,970		$	896,764		$	877,551		$	825,832


x	~~QUARTERLY 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~~



333 ~~THREE~~Three D ~~SYSTEMS CIRCLE~~ ~~ROCK HILL, SOUTH CAROLINA~~ Systems Circle
Rock Hill	South Carolina	29730
(Address of Principal Executive ~~Offices)~~			(Offices and Zip Code)


Supplemental cash flow information
Cash interest payments	$	353	$	378	$	1,975	$	236
Cash income tax payments, net	$	7,119	$	4,715	$	6,739	$	3,925
Transfer of equipment from inventory to property and equipment, net ^(b)	$	4,638	$	8,964	$	2,034	$	3,618
Transfer of equipment to inventory from property and equipment, net ^(c)	$	628	$	364	$	29	$	369
Stock issued for acquisitions	$	—	$	3,208



Noncash financing activity
Purchase of noncontrolling interest ^(d)	$	(11,000	)	$	—


(a)	The amounts for cash and cash equivalents shown above include restricted cash of ~~$934~~$944 and ~~$482~~$755 as of ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$487~~$921 and ~~$301~~$487 as of December 31, ~~2017,~~2018, and ~~2016,~~2017, respectively, which were included in ~~other~~Other assets, net, in the condensed consolidated balance sheets.


(b)	Inventory is transferred from inventory to property and equipment at cost when the Company requires additional machines for training or demonstration or for placement into on demand manufacturing services locations.


(c)	In general, an asset is transferred from ~~property~~Property and equipment, net, into inventory at its net book value when the Company has identified a potential sale for a used machine.


(d)	Purchase of noncontrolling interest to be paid in installments over a four-year period recorded to Accrued and other liabilities and Other liabilities on the condensed consolidated balance sheets.



	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	2		—		(5,723		)	—			—			(5,721		)	—			(5,721		)
Cumulative impact of change in accounting policy	—		—		—			576			—			576			—			576
Stock-based compensation expense	—		21,082		—			—			—			21,082			—			21,082
Net income (loss)	—		—		—			(41,369		)	—			(41,369		)	246			(41,123		)
Pension adjustment	—		—		—			—			204			204			—			204
Foreign currency translation adjustment	—		—		—			—			(13,090		)	(13,090		)	319			(12,771		)
Balance at September 30, 2018	$	117	$	1,347,332	$	(13,926	)	$	(718,565	)	$	(34,422	)	$	580,536		$	(2,341	)	$	578,195


																								Quarters Ended
	Common Stock																							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			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
March 31, 2019																								$	118	$	1,354,683	$	(16,056	)	$	(747,096	)	$	(39,362	)	$	552,287		$	(8,430	)	$	543,857
Issuance (repurchase) of stock	—		—			(4,495		)	—			—			(4,495		)	—			(4,495		)	2		—		(463		)	—			—			(461		)	—			(461		)
Issuance of stock for acquisitions	—		3,208			—			—			—			3,208			—			3,208
Purchase of subsidiary shares from noncontrolling interest	—		(1,440		)	—			—			50			(1,390		)	(860		)	(2,250		)
Cumulative impact of change in accounting policy	—		(10,206		)	—			10,206			—			—			—			—
Acquisition of non-controlling interest																								—		—		—			—			—			—			—			—
Stock-based compensation expense	—		21,084			—			—			—			21,084			—			21,084			—		6,886		—			—			—			6,886			—			6,886
Net income (loss)	—		—			—			(56,057		)	—			(56,057		)	833			(55,224		)	—		—		—			(23,929		)	—			(23,929		)	70			(23,859		)
Pension adjustment	—		—			—			—			(105		)	(105		)	—			(105		)	—		—		—			—			24			24			—			24
Foreign currency translation adjustment	—		—			—			—			25,574			25,574			161			25,735			—		—		—			—			2,025			2,025			(26		)	1,999
Balance at September 30, 2017	$	115	$	1,320,074		$	(7,153	)	$	(667,638	)	$	(27,706	)	$	617,692		$	(3,039	)	$	614,653
June 30, 2019																								$	120	$	1,361,569	$	(16,519	)	$	(771,025	)	$	(37,313	)	$	536,832		$	(8,386	)	$	528,446

March 31, 2018																								$	116	$	1,333,378	$	(9,041	)	$	(698,153	)	$	(14,137	)	$	612,163		$	(2,921	)	$	609,242
Issuance (repurchase) of stock																								—		—		(966		)	—			—			(966		)	—			(966		)
Acquisition of non-controlling interest																								—		—		—			—			—			—			—			—
Stock-based compensation expense																								—		6,606		—			—			—			6,606			—			6,606
Net income (loss)																								—		—		—			(8,862		)	—			(8,862		)	262			(8,600		)
Pension adjustment																								—		—		—			—			164			164			—			164
Foreign currency translation adjustment																								—		—		—			—			(18,905		)	(18,905		)	292			(18,613		)
June 30, 2018																								$	116	$	1,339,984	$	(10,007	)	$	(707,015	)	$	(32,878	)	$	590,200		$	(2,367	)	$	587,833



	Six Months Ended
	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
December 31, 2018	$	117	$	1,355,503		$	(15,572	)	$	(722,701	)	$	(38,978	)	$	578,369		$	(2,382	)	$	575,987
Issuance (repurchase) of stock	3		—			(947		)	—			—			(944		)	—			(944		)
Acquisition of non-controlling interest	—		(7,526		)	—			—			256			(7,270		)	(6,072		)	(13,342		)
Stock-based compensation expense	—		13,592			—			—			—			13,592			—			13,592
Net income (loss)	—		—			—			(48,324		)	—			(48,324		)	114			(48,210		)
Pension adjustment	—		—			—			—			116			116			—			116
Foreign currency translation adjustment	—		—			—			—			1,293			1,293			(46		)	1,247
June 30, 2019	$	120	$	1,361,569		$	(16,519	)	$	(771,025	)	$	(37,313	)	$	536,832		$	(8,386	)	$	528,446

December 31, 2017	$	115	$	1,326,250		$	(8,203	)	$	(677,772	)	$	(21,536	)	$	618,854		$	(2,906	)	$	615,948
Issuance (repurchase) of stock	1		—			(1,804		)	—			—			(1,803		)	—			(1,803		)
Cumulative impact of change in accounting policy	—		—			—			576			—			576			—			576
Stock-based compensation expense	—		13,734			—			—			—			13,734			—			13,734
Net income (loss)	—		—			—			(29,819		)	—			(29,819		)	246			(29,573		)
Pension adjustment	—		—			—			—			147			147			—			147
Foreign currency translation adjustment	—		—			—			—			(11,489		)	(11,489		)	293			(11,196		)
June 30, 2018	$	116	$	1,339,984		$	(10,007	)	$	(707,015	)	$	(32,878	)	$	590,200		$	(2,367	)	$	587,833



	Quarter Ended September 30, 2018
	Intercompany Sales to
(in thousands)	Americas		EMEA		Asia Pacific		Total
Americas	$	499	$	15,540	$	4,888	$	20,927
EMEA	18,259		6,939		1,551		26,749
Asia Pacific	1,134		15		923		2,072
Total intercompany sales	$	19,892	$	22,494	$	7,362	$	49,748



	Quarter Ended September 30, 2017
	Intercompany Sales to
(in thousands)	Americas		EMEA		Asia Pacific		Total
Americas	$	554	$	11,764	$	5,390	$	17,708
EMEA	16,057		4,286		985		21,328
Asia Pacific	613		8		772		1,393
Total intercompany sales	$	17,224	$	16,058	$	7,147	$	40,429



	Nine Months Ended September 30, 2018
	Intercompany Sales to
(in thousands)	Americas		EMEA		Asia Pacific		Total
Americas	$	1,521	$	45,764	$	17,303	$	64,588
EMEA	51,471		18,691		4,687		74,849
Asia Pacific	3,779		16		2,696		6,491
Total intercompany sales	$	56,771	$	64,471	$	24,686	$	145,928



	Nine Months Ended September 30, 2017
	Intercompany Sales to
(in thousands)	Americas		EMEA		Asia Pacific		Total
Americas	$	1,452	$	34,414	$	14,243	$	50,109
EMEA	50,761		13,014		2,900		66,675
Asia Pacific	1,492		165		2,921		4,578
Total intercompany sales	$	53,705	$	47,593	$	20,064	$	121,362


					Change									Change
(Dollars in thousands)	September 30, 2018		December 31, 2017		$			%		June 30, 2019		December 31, 2018		$			%
Cash and cash equivalents	$	92,093	$	136,344	$	(44,251	)	(32.5	)%	$	150,397	$	109,998	$	40,399		36.7	%
Accounts receivable, net	127,092		129,879		(2,787		)	(2.1	)%	114,093		126,618		(12,525		)	(9.9	)%
Inventories	128,164		103,903		24,261			23.3	%	133,936		133,161		775			0.6	%
	347,349		370,126		(22,777		)			398,426		369,777		28,649
Less:
Current portion of capitalized lease obligations	651		644		7			1.1	%
Current portion of long term debt										4,050		—		4,050			—	%
Current right of use liabilities										11,451		654		10,797			1650.9	%
Accounts payable	61,556		55,607		5,949			10.7	%	59,197		66,722		(7,525		)	(11.3	)%
Accrued and other liabilities	61,676		65,899		(4,223		)	(6.4	)%	59,730		59,265		465			0.8	%
	123,883		122,150		1,733					134,428		126,641		7,787
Operating working capital	$	223,466	$	247,976	$	(24,510	)	(9.9	)%	$	263,998	$	243,136	$	20,862		8.6	%



	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		—	—
April 1, 2018 - April 30, 2018	29,165		11.14		—	—
May 1, 2018 - May 31, 2018	48,711		12.66		—	—
June 1, 2018 - June 30, 2018	1,990		13.60		—	—
July 1, 2018 - July 31, 2018	113,978		13.09		—	—
August 1, 2018 - August 31, 2018	121,424		18.93		—	—
September 1, 2018 - September 30, 2018	6,449		18.69		—	—
	436,572	(a)	13.61	(b)	—	—



	Total number of shares (or units) purchased		Average price paid per share (or unit)
Shares delivered or withheld pursuant to restricted stock awards
April 1, 2019 - April 30, 2019	23,079		$	14.11
May 1, 2019 - May 31, 2019	15,972		$	9.47
June 1, 2019 - June 30, 2019	8,312		$	8.16
	47,363	(a)	$	11.50	(b)


(a)	Reflects shares of common stock surrendered to the Company for payment of tax withholding obligations in connection with the vesting of restricted stock.


(b)	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	Certificate of Amendment of Certificate of Incorporation filed with Secretary of State of Delaware on May 19, 2004. (Incorporated by reference to Exhibit 3.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004, filed on August 5, 2004.)

3.4	Certificate of Amendment of Certificate of Incorporation filed with Secretary of State of Delaware on May 17, 2005. (Incorporated by reference to Exhibit 3.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005, filed on August 1, 2005.)

3.5	Certificate of Amendment of Certificate of Incorporation filed with the Secretary of State of Delaware on October 7, 2011. (Incorporated by reference to Exhibit 3.1 to Form 8-K filed on October 7, 2011.)

3.6	Certificate of Amendment of Certificate of Incorporation filed with the Secretary of State of Delaware on May 21, 2013. (Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K, filed on May 22, 2013.)

3.7	Amended and Restated By-Laws of 3D Systems Corporation. (Incorporated by reference to Exhibit 3.1 of Registrant’s Current Report on Form 8-K filed on March 15, 2018.)

10.1*	Severance Agreement between 3D Systems Corporation and Kevin McAlea, dated May 10, 2019. (Incorporated by reference to Exhibit 10.1 to Registrant's current report on Form 8-K filed on May 15, 2019.)

31.1	Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated ~~October 30, 2018.~~August 7, 2019.

31.2	Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated ~~October 30, 2018.~~August 7, 2019.

32.1	Certification of Principal Executive Officer filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated ~~October 30, 2018.~~August 7, 2019.

32.2	Certification of Principal Financial Officer filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated ~~October 30, 2018.~~August 7, 2019.

101.INS	XBRL Instance ~~Document.~~Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL 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.

104	Cover Page Interactive Data File - this data file does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.



	3D Systems Corporation

	By	/s/ John N. McMullen
		John N. McMullen
		ExecutiveVice President and Chief Financial Officer
		(principal financialand accounting officer)
		(duly authorized officer)

June 30, 2019

Weighted-average remaining lease term

Weighted-average discount rate